File photo Yes, confidence in the banking sector is bouncing back and yes, banks are returning to profitability. Big cheers to the Central Bank for embarking on an unprecedented financial sector reform that has seen the revoking of more than 400 licences of banks, savings and loans, finance houses, microfinance and microcredit companies.
The reforms have also led to a significant increment in the stated capital of banks, improved their capital adequacy ratios and deepened corporate governance. Banks and other deposit-taking institutions are now better positioned to aid economic growth by financing several government flagship programmes such as Planting for Food and Jobs (PFJ) and One District, One Factory (1D1F).
Another major challenge for the bank is the persistently high Non Performing Loans (NPLs) ratios, but as the reforms continue to show results, NPLs are trending south, which allows banks to lend more to businesses.
And so it looks all well good, right? Not entirely. This is simply because, for the nine banks that lost their universal banking licences, all of them were local or indigenous banks. And virtually all of the savings and loans, finance houses, microfinance and microcredit institutions that also lost their licences are local players.
What this reform, residually, achieved is tell Ghanaians that local players are difficult to trust. Yes, we saw some local players remain afloat and become torchbearers of the local players, but the effect of the closures on the remaining local players was and continues to be felt.
Several bankers who spoke to the B&FT, for this article, noted that with no single foreign player touched, the message sent out is “it is okay to do business with the foreign players here, rather than local banks because when they face challenges, their licences would be revoked,” one bank boss said.
“During the reforms, we lost deposits and depositors because they felt we could be next. Guess where they took their monies, the foreign banks. They didn’t take their monies to buy stocks or real estate. They just shifted them from the accounts of local banks to foreign banks. Such a sad situation when we want to push the growth of indigenous businesses,” the CEO said.
To these local players, their work in rebuilding the confidence of Ghanaians in their operations would take double or triple the efforts as against that of their foreign counterparts. But the future looks great and the hope is to see the regulator continue […]