Millions Of Dollars & Thousands Of Jobs In Jeopardy As Ghana Cranks Up Merciless Finance Industry Cleanup

Last week, the Bank of Ghana (BoG) made known its intention of sanitizing the country’s finance industry and this week, it kept its word when it got things started by revoking the licenses of several savings and loans companies, as well as finance houses. The apex bank has since appointed a receiver to manage their affairs.

But while the move to clean up the country’s financial sector is commendable, it is starting to brew fresh trouble as Ghana now risks losing up to 4,000 jobs as a result of the overhaul.

The steps taken by the central bank was the culmination of an industry cleanse of lenders and second-level financial institutions that started in August 2017 and cost the government no less than GHC 12 Bn (USD 2.2 Bn) in bonds and cash to cover depositors’ holdings. And the numerous job losses are the newest concern.

The final number of job cuts will depend on what the receiver wants to do with the assets of the companies and the size of the pledged support it receives from the government, Tweneboah Kodua Boakye, executive secretary of the Ghana Association of Savings and Loans Companies, told Bloomberg over a phone call.

The receiver will need some staff of the affected lenders to assist with the liquidation process, “which could take a few years,” according to the central bank.

The closure of GN Savings and Loans Ltd., the biggest lender impacted by the central bank’s directive, could result in as many as 2,700 job losses, Frank Owusu-Ofori, head of corporate affairs for Accra-based Groupe Nduom, the company’s parent, said.

The figure includes 400 cleaners who are contracted at the firm’s 230 branches and another 900 employed by a private security company, he divulged. At the moment, though, GN Savings and Loans Ltd is understood to be working legal channel to challenge the withdrawal of its license.

The cleanup of Ghana’s banking sector has trimmed the country’s list of licensed lenders by nearly a third — the figure is currently 23 and the hammer may yet descend on a few others.

Savings and loans companies have been cut down from 25 from 40, finance houses to 11 from 19, and micro-finance and micro-credit lenders to 168, from 554.

The heat also reached fund managers, which have GHC 4 Bn locked up in fixed-term investments with banks rescued during the cleanup, as well as savings and loans companies and microlenders. And that’s in addition to another GHC 5 Bn tied up in illiquid hard-to-retrieve ventures including direct private equity stakes, unlisted bonds, and related party deals with small to medium-sized companies.

For investment firm, Groupe Nduom, the revoke of GN’s license could come across as a double blow. Groupe Nduom’s Gold Coast Fund Management Ltd. was compelled by the regulatory body to stop taking funds from investors as clients rushed to pull their savings. This was since last October and it’s not looking good for the firm.

However, the worse-hit company is believed to be in the middle of discussions with the Securities and Exchange Commission to complete a prospectus so it can offer bonds of up to GHC 3 Bn (USD 549 Mn) to customers in a maneuvre that could see it recover most of the money locked away in a structured finance fund.

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