Savings and Loans Companies that are in serious financial distress would soon be shut down, Governor of the Bank of Ghana (BoG), Dr Ernest Addison has disclosed.
Dr Addison made the revelation during a meeting with Journalists after meeting to review the health of the Economy last week.
Some of the savings and loans companies are said to be in a “sorry financial state” as a result of the panic withdrawals that has hit most of them.
The panic withdrawals are largely a spillover effect from challenges in the banking sector.
Some of the Savings and Loans Companies had told Joy Business that the mass withdrawals had been heightened by fears that they could collapse because of their close links with some local banks that were recently shut down by the Central Bank.
Meanwhile, the challenges facing the Savings and Loans sector remain fluid as the companies are unable to recover the loans given out.
Request for financial support
The Association of Savings Companies recently petitioned the Bank of Ghana to support some of their members said to be in financial distress.
The Executive Secretary of the Association, Tweneboa Kodua Boakye, had explained to Joy Business that the petition to support the troubled firms was to prevent most of them from going down.
Reasons for Bank of Ghana’s action
According to the Governor of the Bank actions taken so far to stabilise the banking sector would not be different from the Savings and Loan Companies.
He added that it is critical to allow Savings and Loans Companies that are in good standing are allowed to operate.
He added that “If these Savings and Loans institutions are insolvent, they would have to be liquidated because that is the solution for insolvent financial institutions.”
The way forward
The Bank of Ghana is currently engaging the Finance Ministry on how to deal with the depositors of the Savings and Loans Companies before it goes ahead to liquidate them.
“The engagement would ensure that the necessary funds can be raised on the part of the government to cushion depositors of these institutions. It believed that this could one of the tough measures that that regulator is planning to take to sanitize the entire industry,” the Governor said.