The seasoned economist Mr. Kwame Pianim has criticized the manner in which the central bank dealt with the financial sector clean up. It could take up to a decade to restore confidence,he said in a TV interview.
This is in contrast to what the BOG Governor said a couple of days ago purporting that confidence in the financial sector has rebounded. The governor’s assertion was based on the increased deposit over the last 6 months as indicated in the latest banking report.
Mr. Pianim also made particular reference to the fixed deposits placed in financial institutions by pensioners. People collected their lump sum pension payments and deposited them in fixed deposits of licensed entities. According to him the confidence-eroding factor is the capped payments of GHS 20,000 promised to depositors who placed their monies with micro-finance and savings and loans companies. These institutions were licensed by the Bank of Ghana.
Much as the clean-up was important for sustainability and efficiency, some of the actions ended up being very costly. Deposits are known to have increased. However, the increase in deposit may not be necessarily be due to regained confidence. It is more a case of redirected deposits which should have gone to the savings and loans, microfinance and the unlicensed ponzi schemes.
The increase in confidence is also not real because the industry and its players are not seen doing anything actively to drive confidence.
Regaining confidence would begin where repayments to depositors/investors end. Where the regulator and industry players actively engage in activities that boost confidence.
A recent Afrobarometer report indicated that people have a higher confidence in the banks than in the lower-tiered institutions after the financial sector clean up. According to the report, people found the banks safer and that is why they would rather place their funds in the banks. Deposits have thus been redirected for people who have no option than to do banking.