Dr John Gatsi
Dr John Gatsi, a senior lecturer at the University of Cape Coast, says what is panning out in the country’s mainstream banking sector is not different from happenings in the rural banks sector which focuses on the rural economy.
“Even though we are talking about banks, we need to think about microfinance institutions. Most of them are indigenous in nature. Though there was some turmoil in the past, whether we like it or not, they support micro-entrepreneurs within our rural economy.
“In fact if you go to some rural banks currently, we would be shocked to see that they are just hanging and almost phasing out of business. Their situation is very serious.”
Speaking at a stakeholders’ forum on the theme, “ensuring private indigenous participation in Ghana’s banking sector organised by the Economy Times newspaper yesterday in Accra, Dr Gatsi said these institutions provide loans to traders, farmers, fisher folks and young entrepreneurs in the rural economy.
Citing a financial stability report released by the Bank of Ghana (BoG) two years ago, he said there were as many as 144 licensed rural banks, most of whom were concentrated outside Accra and supplying credit to support the rural economy.
He said the private sector contributed 88.7 percent of Non-Performing Loans to the banking sector while the foreign private sector contributed 7.7 percent to NPLs.
“Indigenous businesses contributed 75.6 percent to NPLs. So that tells you that there is something basically wrong with managing indigenous businesses. If they are borrowing at high rates, those are incentives for default. In October 2017, the private sector, in general, contributed 94.7 percent to NPLs. Foreign private sector contributed 10.8 percent to NPLs. Indigenous businesses contributed 78.2 percent to NPLs.
“So basically as a people, we should begin to check and ask what do we do to our indigenous businesses to bring up their corporate governance, funds utilisation, management of their funds, investment of their funds in appropriate business ventures to be able to repay their loans that they take? Indigenous businesses are a contributing factor to indigenous banks, so we should link the issues appropriately.
Dr Gatsi, therefore, called on indigenous banks to be properly licensed.
“Since some of the reasons that culminated in the revocation of the licences of most banks recently had to do with unlawfully acquisition of licences, indigenous banks must ensure they appropriately acquire their licences, lawfully acquire adequate paid up capital. If you take capital from the wrong source, it is inappropriate and you fall foul of the BoG Act.”
By Samuel Boadi