The Bank of Ghana (BoG) has mounted a strong defence of its ongoing reforms in the microfinance and specialised deposit-taking institutions sector, saying the measures are critical to restoring confidence, strengthening institutional resilience and addressing weaknesses that have undermined the stability of the industry.
The Bank of Ghana (BoG) has mounted a strong defence of its ongoing reforms in the microfinance and specialised deposit-taking institutions sector, saying the measures are critical to restoring confidence, strengthening institutional resilience and addressing weaknesses that have undermined the stability of the industry.
The central bank says the overhaul is not intended merely to impose tougher regulatory requirements on savings and loans companies and other specialised deposit-taking institutions, but to create a stronger and more trusted financial sector capable of withstanding economic shocks.
Second Deputy Governor of the BoG, Mrs Matilda Asante-Asiedu, made the position clear at the 16th Annual General Meeting of the Ghana Association of Savings and Loans Companies.
“This reform is not merely about introducing stricter regulations. It is about rebuilding public confidence and trust,” she said.
The reforms are centred on three broad areas — capital adequacy, governance and risk management, and the restructuring of the fragmented sector.
Mrs Asante-Asiedu explained that the revised capital requirements were intended to give institutions stronger buffers to absorb losses and withstand economic shocks.
The enhanced governance and risk-management requirements, she added, would improve oversight and strengthen the ability of institutions to identify and manage vulnerabilities before they threaten their operations.
BoG acknowledges transition concerns
While defending the rationale for the reforms, the Second Deputy Governor acknowledged concerns from industry players about the pace of implementation, transition arrangements and other aspects of the new regulatory framework.
She said the concerns had emerged from engagements between the central bank and the Ghana Association of Savings and Loans Companies.
“Based on our engagement with the association, we took note of concerns about the timelines, transition arrangements and other aspects of the reforms,” she said.
According to her, technical teams from the BoG and the association would continue discussions to resolve outstanding issues and facilitate a smoother transition for affected institutions.
The central bank is also working on additional regulatory instruments, including guidelines on corporate governance and risk management, which are expected to be published for industry stakeholders to review and provide comments.
The move is expected to further clarify the regulatory expectations institutions will have to meet under the revamped framework.
‘Reform is never costless’
Mrs Asante-Asiedu, however, conceded that complying with the new requirements would impose additional financial and operational pressures on institutions in the short term.
“We recognise that reform is never costless. Compliance costs, operational adjustments and new regulatory expectations are real burdens, and the Bank of Ghana does not take them lightly,” she said.
She nevertheless argued that the immediate costs should be viewed against the longer-term gains of building stronger financial institutions and restoring confidence in the sector.
According to her, properly implemented reforms would help strengthen public confidence, deepen financial inclusion and create conditions for greater local participation in the financial services industry.
The position reflects the BoG’s broader objective of ensuring that institutions taking deposits from the public have sufficient capital, effective governance structures and robust systems to manage financial and operational risks.
A key issue facing the sector is the management of non-performing loans (NPLs), which can weaken the financial position of savings and loans companies by reducing income and tying up funds that could otherwise be deployed for productive lending.
Against that background, the Ghana Association of Savings and Loans Companies has committed to working towards bringing the sector’s NPL ratio within the target established by the BoG.
The commitment is expected to form part of industry efforts to improve asset quality and strengthen the financial health of savings and loans companies.
The association’s pledge, coupled with the BoG’s regulatory reforms, is expected to place greater emphasis on prudent lending, stronger risk controls and improved institutional governance.
For the central bank, the ultimate objective is to ensure that the specialised deposit-taking sector emerges from the reform process more resilient and better positioned to support households, businesses and the broader economy.
