The country is set to receive a total of $250 million to advance the Ghana Development Finance Project, the World Bank Group has revealed.
This will involve wholesale financing to financial intermediaries such as savings and loans companies to on-lend to Micro, Small and Medium Enterprises (MSME).
It is, therefore, working with the Finance Ministry in consultations with the Central Bank of Ghana to conclude preparations for the project which awaits approval before September.
World Bank Country Director for Ghana, Pierre Frank Laporte, says the project will also provide Credit guarantees to encourage financial institutions to lend to SMEs and other borrowers who lack collateral.
“We expect this project to be approved by our board sometime before September this year”, he said.
This was revealed at the 10th Annual General Meeting of the Ghana Association of Savings and Loans Companies (GHASALC) held virtually.
Ghana’s financial sector for the past years has gone through some amount of clean-up meant to stabilise and strengthen the sector for the better.
Financial intermediaries have been the hardest hit, like many of them it has resulted in the revocation of the licenses of 15 members of GHASALC for instance.
COVID-19 impact on Financial Intermediaries
COVID-19 is compelling many businesses especially financial institutions to change their way of doing business.
In the face of the pandemic, Micro, Small and Macro Enterprises (MSME) and other clients of the savings and loans companies are consistently asking for loans to be restructured or rescheduled.
Officials say this has brought more strain on the resources of the member companies because businesses of clients are not doing well.
Executive Secretary for GHASALC, Tweneboah Kodua Boakye observes Covid-19 has really confirmed that the majority of the public depends on Savings and Loans Companies for survival and business growth.
“Deposits are not coming in as expected. Clients’ businesses are not doing well. The cost is still high. Non-performing loans are rising in the midst of liquidity constraint.”
Board Chairman, Kwaku Duah Berchie, encouraged its members to embrace what has become the “new normal” and innovate.
“Let us embrace the “new normal” and innovate as we build synergies. As we consider building synergies in the midst of Covid-19, we should embrace and invest in appropriate technology.
We cannot win the battle and grow if we continue to operate in silos. Let us consider joining all hands.”
He added that risk management should also be enhanced while they continue to build the capacities of the directors and employees.
Post COVID-19 business posture
At the meeting, World Bank Country Director for Ghana, Pierre Frank Laporte, encouraged them to remain sustainable and resilient post the financial sector clean-up. “I also encourage you to continue to refine your business processes and risk management processes to better deal with the impact of the Covid-19 which is likely to challenge the ability of your clients to honour their loan obligations”.
The government recently published its national financial inclusion and development strategy which seeks to increase the percentage of adults with access to formal financial services from 58% in 2015 to 85% in 2023. Savings and Loans Institutions can significantly contribute by leveraging on their clientele base and branch networks in all sixteen regions of Ghana.
The association currently serves in excess of 6 million customers across 555 business centres in all the regions across the country. To do so efficiently, Mr Laporte advises Savings and Loans to continue embracing technology to deliver innovative services at a lower cost.
“Savings and Loans Companies have an important role to play in economic recovery post-Covid-19 pandemic.
I hope this AGM will help to reflect on how GHASALC can better support MSME to recover from the pandemic. It is important to ensure the MSMEs will remain the engine of growth.”
Meanwhile, the World Bank feels very strongly that Digitalization is key to innovation, especially in the financial sector and that it will continue to support the digitalization agenda in Ghana.
Other Financial Sector Support
In 2018, the World Bank approved a $30 million International Development Association (IDA) credit for Ghana.
The Financial Sector Development project which ends in 2023, is supporting the government of Ghana’s efforts to enhance financial sector stability and increase financial inclusion.
Mr Laporte explained that “to the financial sector development project $30 million, we are supporting the Bank of Ghana to strengthen the regulatory and supervisory framework for Specialized Deposit‐taking Institutions (SDIs) and credit.
With the ultimate goal to limit the recurrence of financial distress with increasing consumers stressed in Specialized Deposit-taking Institutions (SDI).”
The Same project supports the Ghana microfinance institutions network to ensure the effective participation of industry associations including GHASALC In the regulatory reform.
“…and I invite you to participate in this project”, he added.