Dr. Lord Mensah, Senior Lecturer in the Department of Finance at the University of Ghana Business School (UGBS), calls on the Bank of Ghana (BoG) to alleviate consequences accompanied by the dissolution of 347 Microfinance companies in Ghana.
Speaking to Citi Business news on 6th June 2019, Dr. Mensah expressed that this action of BoG would have adverse effects on the informal sector of Ghana, since they are the main beneficiaries of these Microfinance institutions, if not mitigated.
In his opinion, the current turn of events would retrogress the economy as the informal sector forms a major part of the economy, which the microfinance institutions have access to. “… and the universal banks can’t serve the informal sector as the microfinance companies do”, he stated.
He, however, expresses doubt concerning the receiver’s (Eric Nana Nipah) assertion that creditors of these banks would be paid within a month, with reason that interest rates usually promised by Microfinance Companies were higher than usual, hence will make it impossible for the Central Bank to honor its promise to depositors.
When asked about Bank of Ghana’s intention to carry out the same exercise on the Savings and Loans sector, Dr. Mensah predicts that its impact will be worse than what is being experienced with the ongoing clean-up exercise in the microfinance sector.
“The way the financial institution operates lends itself to a lot of interconnection of operations and activities. So, whatever we are seeing in the microfinance sector could be worse in the Savings and Loans sector. For me, we shouldn’t expect anything different from what we are seeing now”, he elaborated.
Dr. Lord Mensah thus places an urgent plea for Bank of Ghana to quickly put in place measures that will assuage the damages.
Source: Citi Business News
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