The government will need close to GHȼ55 billion to clean up the micro-finance institutions (MFI) subsector, a Senior Lecturer at the University of Ghana and Council Member of the Chartered Institute of Credit Management Ghana (CICMG), Dr Kinsley Charles Akuetteh, has said.
He said his research in the sector had revealed that the government would need more than five times the amount it used in cleaning up the banking sector.
That, he said, was due to the number of bad loans that were currently on the books of majority of players in the MFI sector.
Dr Akuetteh was speaking at a ceremony to induct the Chief Executive Officer of Bond Savings and Loans, Mr George Ofosuhene, as an honorary fellow of the CICMG.
“Considering the level of bad loans in that sector, put together we will need about GHȼ55 billion to clean up,” he stated.
Credit risk management
Dr Akuetteh said the problem had resulted from the poor credit risk management regime in the country and warned that if not checked as soon as possible, it would crash the whole financial system in the country.
“Credit is a very important aspect of any economy but in the last few years, what we are seeing is not the best. I have worked with the BoG in terms of banks’ supervisory relationship and I have seen reports that are very alarming,” he noted.
“Apart from that, I have been on the field too to see what is going on and the kind of things that our financial institutions are doing, and the results that are coming up, in the next few years there will be no credit for anyone. We are almost crashing our financial market,” he cautioned.
He, therefore, urged credit practitioners to take steps to correct the wrongs in the sector.
“Let us begin to do the right thing and work out our credit as it ought to be. Basel I, II &III have given us guidelines and if we follow them and do the right thing, the economy will be better,” he stated.
Guarding the process of managing credit
Mr Ofosuhene advised credit risk managers to guard the process of managing credit because credit played a huge role in national development.
“From the way things are going in this country, if we don’t take care we will crash, and this is because of a simple reason, which is technology. Technology is also becoming part of the process of managing credit and because of that, we may lose what it means to manage the process,” he explained.
“Credit is like the law of gravity, you can’t move away from the principles and tenets that guard the process of managing credit. If you do that you will fail, so we all need to respect the laws that guard credit and I hope that we will be able to cause some change with this institution. People need to understand how these things are supposed to be done,” he added.
Pillar of economy
The Executive Director of CICMG, Mr Agyapong Amo, also indicated that the induction of Mr Ofosuhene was to incorporate certain outstanding CEOs into the institute to promote good credit risk management.
“It is part of our efforts to encourage good credit risk in Ghana and we want to bring everyone on board because credit is the pillar that the economy runs on,” he said.
“Without credit, the economy will be in shambles,” he added.
He also urged the practitioners within the industry to exhibit the right competencies and ethics.
The Chartered Institute of Credit Management Ghana (CICMG), at a short ceremony inducted Mr George Ofosuhene into the institute to help steer its affairs.
This was after the institute conferred on him an honorary fellow in recognition of his outstanding leadership and contribution in the credit risk industry.