By Frederick E. Aggrey
The Ministry of Finance and Economic Planning, on behalf of the Government of Ghana, has secured a 14 million Euros loan facility from the Kreditanstalt fur Wiederaufbau (KFW) for the establishment of a Deposit Protection Scheme in Ghana.
The loan facilities are made up of 13 million euros and a financial contribution of 1 million euros.
The Scheme is intended, among other things, to protect the savings of small and unsophisticated depositors, especially in the event of a bank’s closure.
It would be recalled that following the restructuring and liberalisation of the financial sector in the 1990s, and the subsequent reforms undertaken to make the financial sector more stable and sound, and coupled with general economic growth and expansion, financial intermediation has increased in Ghana.
A number of non-bank financial institutions have emerged, albeit, with its numerous attendant problems, and these have affected public confidence in the sector greatly.
It would be recalled that the country has been rocked with several incidents of microfinance and non-banking financial institutions allegedly bolting away with customer’s deposits, some of which even became an electioneering issue during the 2016 electioneering period.
In view of the foregoing, the Loan and Financing Agreement was laid in the House on March 2, 2018, by the Minister for Roads and Highways, Kwesi Amoako-Atta, and was aimed at addressing the general issues concerning the security of depositor’s monies with financial institutions.
The Agreement was, therefore, referred to the Finance Committee, pursuant to Article 103 of the 1992 Constitution and Orders 169 and 171(1) of the Standing Orders of Parliament.
The loan agreement is aimed at providing funds for the establishment of a Deposit Protection Fund, intended to protect depositors from loss, in the case of a bank’s failure to pay its customers. It is also to support the Bank of Ghana in meeting one of its objectives of fostering the soundness, solvency, and efficient functioning of a stable, market-based financial system in Ghana.
As part of measures aimed at sustaining the scheme, banks and specialized deposit-taking institutions, licensed by the Bank of Ghana, would be required, under Act 931, to make premium payments to the fund.
The Committee, in presenting its report, was of the view that the move would make an important contribution to the maintenance of a sound and stable banking sector.
The members hailed the move by the Bank of Ghana, except a section of the Minority, who were of the view that the Bank of Ghana, on its own, is highly placed and capable of being able to raise the 14 million Euros in order to avoid excessive borrowings, especially, in view of the President’s recently much-touted slogan of ‘Ghana Beyond Aid”.
The Minority Leader, Haruna Iddrisu, in supporting the approval of the loan agreement, advised the government to give timelines for the implementation of the ‘Ghana Beyond Aid’ slogan, in order that it becomes a national policy and not mere rhetoric.
Finance Minister Ken Ofori Atta