What were we told at the outset of the banking sector purge in Ghana? “Not a single depositor will lose their investment!” It is not for no reason that hardworking Ghanaians decided to place the product of their sweat and toil in the care of institutions duly licensed by the Bank of Ghana for that specific purpose – to mop up deposits from innocent investors (Ghanaians) and pay them interest on agreed terms.
Microcredit, Microfinance and Savings & Loans companies over years sprang up all over the country, majority of which were licensed and supervised by the Bank of Ghana. To the knowledge of the innocent investor, these institutions were audited in accordance with the law, they paid taxes to the Ghana Revenue Authority (GRA), they paid monthly contributions to the Social Security and National Insurance Trust (SSNIT), and they adhered to all the statutory requirements imposed on institutions operating in the financial sector.
These institutions were subjected to regulatory scrutiny by the Central Bank and had boldly displayed on the walls of their receptions, their regulatory certificates attesting to their licensing by the Central Bank. These institutions advertised copiously in the media, both print and electronic. They engaged in Corporate Social Responsibility (CSR). They had signage displayed outside their offices and indeed across the country.
They were not hiding; they were in full view! Innocent investors on several occasions encountered officials of the Bank of Ghana’s Banking Supervision Department on site visits at the offices of these companies, ostensibly checking their books, scrutinizing their accounts, interacting with management and staff, and leaving with broad smiles of approval! The innocent investor was comforted by this, as he rested assured that his investment, his fixed deposit, was fully secure, under the eagle-eyed supervision of the no-nonsense Central Bank……or so he thought.
Fast-forward to present-day Ghana, scores of such institutions have had their licenses revoked, with the attendant anxiety, uncertainty, confusion and distress imposed upon the innocent investor. Palpitations and fits of panic are the order of the day. Ghanaians are staring financial calamity in the face. The innocent investor’s waterloo is upon him. But amidst the doom and gloom, there is hope! This hope is founded on one salient principle – EQUITY! “The quality of being fair and impartial”. EQUITY! What is this equity that presents the innocent investor with this glimmer of hope? The answer is a simple one. Seven banks – UT Bank, Capital Bank, Unibank, Royal Bank, Sovereign Bank, Beige Bank, Construction Bank – were ‘collapsed’ by the Central Bank by the revocation of their banking licenses for a variety of reasons, mainly gross mismanagement culminating in insolvency. What was the decree by Government and the Central Bank at the time? – “Not a single depositor will lose their investment”.
The first two – UT and Capital – were subsumed by the state-owned GCB Bank, while the remaining five were merged into the newly-created state-owned Consolidated Bank Ghana Ltd. Government went further to issue bonds in order to raise billions of Cedis to cater for the bad assets of those banks, and injected fresh capital into the new bank. By so doing, Government in one (or two) fell swoop(s), created a solid state-owned bank and strengthened another, to see to the interests of depositors of the erstwhile banks, and to apply some much-needed good governance to cure the corporate malaise that was the main stay of the erstwhile banks.
To the innocent investor, the thinking behind this intervention is no rocket science. It was simply a case of the Central Bank owning up for its poor supervision of these institutions. The Central Bank was both duty- and statute-bound to supervise the operations of these banks and to ensure that they complied with the Central Bank’s prudential requirements, the ripple effect of which would be the engendering of confidence in the mind of the innocent investor about the safety of their investments and deposits in those licensed institutions. The Bank of Ghana failed to do this. The innocent investor, therefore, unaware of the precarious solvency position of these banks, freely and willingly placed his hard-earned money at the disposal of these banks in current and savings accounts, as well as other financial instruments such as fixed deposits, treasury bills etc. When the chips fell and the banks were collapsed, the BOG had what appears to be no option but to make up for the liquidity deficit of those banks by providing the much-needed funds to ensure that not a single depositor lost their money.
Government touts as an achievement the protection of funds held by some 1.4 million depositors in the collapsed banks, for which the Government has been roundly applauded. The intervention by the Government to save depositors of the collapsed banks was a tremendous source of comfort for depositors of the then-struggling Microcredit, Microfinance and Savings & Loans companies – the innocent investors. The investors by this time were terribly afflicted by the scourge of insolvent financial institutions. Their interest payments had all but ceased, and the repayment of their principal amounts at the expiration of the tenor of their investments was not forthcoming. The innocent investor, in dire need of money for school fees, hospital bills, rent payments, and money for general survival, was unable to access his own funds, because shareholders and directors of financial institutions holding his money had consciously decided to turn themselves into emperors, living lives of ostentation and luxury, the likes of which we had never seen before. Mansions, sports cars, all manner of toys aplenty.
They were monarchs with endless streams of liquidity for their profligacy, the source of which was the sweat and toil of innocent investors. They ran their companies like their personal piggy banks, only this time, the piggy banks in question were bottomless pits, spitting out wads of cash at the pleasure of their owners. Wads of cash belonging to young men and women trying to develop the culture of saving, retirees just wanting a stable income out of their retirement money, poorly paid civil servants seeking another stream of income, teachers and nurses putting some money away for a rainy day, policemen and soldiers investing for the future of their children aware of the dangerous nature of their jobs, Ghanaians in the diaspora sending money home in anticipation of their return to the motherland, poor rural farmers investing the proceeds from the sale of their harvests; simply put, ordinary Ghanaians – innocent investors! In spite of the great difficulty he was confronted with, the innocent investor was down but not out.
There was light at the end of the tunnel. Happily and thankfully, Government and the BOG had provided the requisite funds to cater for every single depositor of the banks, so why wouldn’t they do same for the Microcredit, Microfinance and Savings & Loans companies? It was a no brainer, or so he thought! Like clockwork, less than twenty-four hours after the revocation of the licenses of the distressed banks, customers and depositors had access to their funds seamlessly. The innocent investor expected the same efficiency and care. But alas it was not to be. It has been nearly six (6) months since the ‘cleansing’ of the other financial institutions began (Microcredit, Microfinance and Savings & Loans), and till date, the status of depositors is unclear. The popular slogan “No depositor will lose his money” has evaporated into thin air. Depositors queued at designated locations such as the Registrar General’s Department, armed with bundles of documents, to fill out validation forms and swear affidavits, all in the hope that their funds, just as was the case with the collapsed banks, would be available to them within the shortest possible time.
Government purportedly released some 900 million Ghana Cedis to the Receiver to be paid to depositors whose claims were validated. From all indications, this amount is woefully inadequate to cater for the claims of all depositors. But why would Government/BOG release this amount, fully cognizant that same would be inadequate to liquidate the claims of the innocent investor? Why would Government/BOG treat this class of depositors differently from how they treated depositors of the collapsed banks who were licensed by the very same BOG? With the passage of time, by piecing together various statements made by the Receiver (whose work frankly has been slow, lackluster and utterly disappointing) as well as the BOG, it is now crystal clear what the intentions of the Receiver and the BOG are, relative to this matter.
The goalpost has been shifted a couple of times. Below is the trajectory: 1. “Government has provided the funds to pay the validated claims of depositors” 2. “A forensic audit is underway. While it is ongoing, all claims less than 10,000 Ghana Cedis will be paid in full. Depositors with claims above 10,000 Ghana Cedis will be paid a total of 10,000 Ghana Cedis, and will receive the remainder after the forensic audit”. (My checks reveal that no forensic audit is being done. I stand to be corrected) 3. “All depositors will be paid a maximum of 10,000 Ghana Cedis. If their claims are above 10,000 Ghana Cedis, they will be paid based on what the Receiver is able to recover from the assets of the affected financial institutions”.
Story Number 3 appears to be the current rule, and it has been repeated a number of times by the Receiver. This cap figure has now been revised to 20,000 Ghana Cedis, with the Receiver’s Spokesperson, Madam Philomena Kuzoe releasing a press statement on Friday 8th November 2019 to this effect. Is this fair to the innocent investor? Wherein lies the EQUITY? – Is it fair that depositors of banks were paid in full, and those of Microcredit, Microfinance and Savings & Loans companies are not being paid in full? – Were they all not regulated and licensed by the same BOG? – Were they all not supervised by the same BOG? – Did they all not report to the same BOG? – Were both classes of depositors not oblivious to the rot going on in those institutions, something that the BOG should have noticed long before the collapse? – Are the depositors of the collapsed Microcredit, Microfinance and Savings & Loans companies less Ghanaian than the 1.4 million depositors of the collapsed banks? – Most importantly, is it fair that simply by virtue of the fact that they invested 20,000 Ghana Cedis and below in the collapsed institutions, some investors will be able to recoup 100% of their investment immediately, while others, no matter how much they invested, only recoup 20,000 Ghana Cedis immediately and the rest if/when the Receiver wakes up from its slumber and tries to recover something from the assets of the companies and/or their directors and shareholders? – Was it wrong for the innocent investor to invest more than 20,000 Ghana Cedis in an institution duly licensed and supervised by the BOG? And why must the innocent investor now suffer for investing more than 20,000 Ghana Cedis? So where at all is the equity??? Why is the BOG/Government not following its own precedent? Why is the BOG not owning up for its failure of supervision by doing for this class of depositors as it did for the other class of depositors.
This may even be fertile fodder for a lawsuit, and there are in fact whispers of potential lawsuits and class actions against the BOG and the Receiver. Mr. Government, Mr. BOG, do the equitable thing! Do the just thing! Do right to all manner of persons! The most pathetic aspect of this is the issue of the Receiver seeking to realise some value from the recovery of assets of the collapsed Microcredit, Microfinance and Savings & Loans companies, which value it will pay to depositors as the balance on their deposits. This is utterly laughable and outright misleading. What effort, if any at all, has been made towards this? For starters, have the assets of these institutions, their shareholders and directors even been identified at all? If the Receiver and the BOG think that the directors and shareholders of those financial institutions are sitting around twiddling their thumbs and waiting for their assets to be seized and liquidated and the proceeds paid to depositors, then both the Receiver and the BOG are dreaming and not up to the task. They must wake up and smell the coffee!
The directors and shareholders are walking around freely, enjoying the fruits of their mismanagement and corruption, dissipating and disposing of the assets they have acquired, hiding them under fictitious names, transferring them to foreign jurisdictions etc. What exactly has been done to protect and/or preserve these so-called assets in order that steps may be taken to realise some value out of them for the benefit of the innocent investor? This aspect of the matter has been very poorly handled and may result in whatever is actually recovered paling into insignificance as compared to the legitimate demands and expectations of depositors. A pyrrhic victory awaits the BOG and the Receiver.
This would be a catastrophic dereliction of duty with far-reaching consequences. I may not be a financial expert, but my uninitiated mind tells me that the barest minimum inter-agency collaboration would have eventuated in successfully identifying and protecting the said assets during this transition period to guard against dissipation. What could have been done?
1. BOG should have ensured that bank accounts owned, operated and affiliated to the Microcredit, Microfinance and Savings & Loans companies, their shareholders, directors and related parties were frozen on the date of the revocation of their licenses 2. The Driver & Vehicle Licensing Authority (DVLA) could have provided data on all vehicles owned by the companies, their shareholders, directors and related parties to have the documentation of those vehicles flagged in order to prevent the sale of the vehicles
3. The Collateral Registry of the BOG could have supplied information on any assets collateralized by the companies, their shareholders, directors and related parties to prevent those assets from being dissipated
4. The Lands Commission could have provided information on all landed property owned by the companies, their shareholders, directors and related parties to bring these to the fore and prevent those assets from being dissipated 5. The Ghana Stock Exchange could have provided information on shares owned by the companies, their shareholders, directors and related parties, and bonds and financial instruments bought into by them, to bring these to the fore and prevent those assets from being dissipated 6. The Securities and Exchange Commission could also have provided information sourced from the institutions it regulates which points to assets and/or investments held by the companies, their shareholders, directors and related parties
7. The Registrar General’s Department could have provided information on other companies owned by the financial institutions, their shareholders, directors and related parties, and the value of the shares in those companies 8. The GPHA and Airport Authorities could have provided information on any goods at the ports of entry in the name of the companies, their shareholders, directors and related parties to prevent those assets from being dissipated 9. The passports of directors and related parties should have been frozen to prevent them from fleeing the country to evade justice 10.National Security should have begun monitoring the movement and communication of shareholders, directors and related parties
11.The personal homes and offices of the companies, their shareholders, directors and related parties should have been clearly identified 12.The Ghana Revenue Authority could have supplied information on the taxes of the companies, their shareholders, directors and related parties from which their various sources of income and assets could be identified 13.SSNIT could have supplied information on pension contributions by the companies, their shareholders, directors and related parties 14.Interpol could be collaborated with to identify foreign assets standing in the names of the companies, their shareholders, directors and related parties to bring these to the fore and prevent those assets from being dissipated 15.All bank transfers effected by the companies, their shareholders, directors and related parties should have been identified and tracked 16.All Ministries, Departments & Agencies (MDAs) who have transactional relationships with the companies, their shareholders, directors and related parties should make full disclosures of these transactions 17.
Any other measures that would have helped to put a net over their operations and preserve and protect all recoverable assets The above steps carefully and diligently executed, could have very easily contained the situation and preserved what assets were in the names of the companies and their principals. Ten, fifteen or twenty efficient, aggressive law firms could then have been enlisted to analyse all the information gathered for the purpose of mounting an aggressive assault on the identified assets for the purpose of recovery, in exchange for an agreed percentage of whatever is recovered. Their work would have been relatively easier. As it stands, it would be a massive surprise if the Receiver is able to identify and recover anything substantial from the so-called assets of the companies and their principals. It is simply a case of too little too late. Closing the stable doors after the horses have bolted is an act in futility.
The BOG and the Receiver have let the innocent investor down and have failed on the job. The BOG/Government must realise that refusing to pay depositors the entirety of their investments will definitely weaken and eventually extinguish the confidence that Ghanaians have in the remaining Microcredit, Microfinance and Savings & Loans companies, and will make it difficult and/or almost impossible for these companies to raise funds in the form of deposits from the investing public. Their intervention in this matter therefore is necessary for the very survival of the industry. Failure to intervene poses an existential threat to the industry. It must not be lost on us that it is these institutions that fill the gap between Small and Medium Scale Enterprises (SMEs) and the universal banks. It is they whose pervasive tentacles answer the call of ordinary Ghanaians in all spheres of endeavour looking to raise capital for a variety of reasons. It is therefore vitally important for the advancement of private enterprise in this country that these institutions remain in business to continue with the good work for which they are licensed by the BOG. Now to the Government. Next year is an election year, and promises to be a hugely eventful one at that. Neither the Receiver nor the BOG will crisscross the length and breadth of the country soliciting the votes of the masses. It is you the politicians who will do that.
If you will let the poor planning and inefficiency of the Receiver and the BOG affect your electoral fortunes, then you would have let yourselves down sorely. You have no option in the matter. Pay up depositors’ validated claims, and offset whatever you pay out with what little you manage to recover. Depositors have been quiet over the past few months to avoid antagonizing the Government, Receiver and BOG, all in the hope that their funds, as it happened with the banks, will be returned to them in full! Do not take their silence for granted. Unlike with the Receiver and the BOG, the citizens have a unique constitutional vehicle for passing their verdict on the Government of the day on the 7th of December every four years. Do that which is right, lest you suffer the umbrage of the masses. Mr. Government, do not allow the sins and failings of career bureaucrats and technocrats to be visited upon you! The political effects will be dire and grave, and posterity may never forgive you. Bite the bullet and let this cup pass you by! —
By: Philip Kwaku Owusu (“An Innocent Investor”