THE country is gradually elbowing its citizens and indigenous businesses out of the financial sector by consistently demanding that operators in that space raise more funds as minimum paid up capital before they are granted licences to operate, a Chartered accountant and former Minister of Finance, Mr Seth Terkper, has observed.
He said the situation, if not checked and reversed, would result in foreign entities taking a strong hold of the country’s financial sector to the detriment of indigenous entrepreneurs.
Speaking in an interview with the GRAPHIC BUSINESS on September 14, Mr Terkper said the recently announced capital directive for mobile money operators and payment system providers would push the local companies operating in that space out of business.
The new capital requirement for mobile money operators have been pegged at GHȼ20 million, while that for payment system providers have been fixed at GHȼ8 million and GHȼ2 million, a phenomenon, the former Finance Minister said was too high and had, therefore, called on the central bank to review it.
Juxtaposing that with the recent increase in the minimum capital for banks which saw some local banks lose their licences and the increase in minimum capital of insurance companies which many believe would push the locals out of business, he said the country was gradually sacking its locals from the financial space.
“We are gradually placing our economy into the hands of large foreign entities at the expense of locals with these high minimum requirements in the financial space.”
“I am not against foreign investments because every country needs it but we have to protect our locals as well. Many of them do not need that amount of money to operate effectively,” he said.
It should be recalled that the Bank of Ghana (BoG) moved the minimum capital requirement for universal banks in the country from GHȼ120 million to GHȼ400 million. This action, coupled with other reforms saw nine local banks losing their licences.
Quiet recently, the National Insurance Commission also announced a 233 per cent jump in the minimum capital requirement for insurance companies operating in the country. The minimum capital for life and non-life insurance companies moved from GHȼ15 million to GHȼ50 million, with that of re-insurance companies also moving from GHȼ40 million to GHȼ125 million.
The minimum capital for insurance broking companies was also raised from GHȼ 300,000 to GHȼ 500,000 and they are all expected to meet this new requirement by June 2021.
Coming at a time when most of the local insurance companies are even struggling to meet the GHȼ15 million target, some industry experts believe this directive would push them out of business.
Financial sector largely dominated by foreigners
Mr Terkper indicated that the country’s financial sector was already largely dominated by large foreign companies and any policy measure that puts minimum capital requirements at very high levels would further pushed the locals out.
“If you look at the landscape, the sectors that are growing are petroleum, and financial services but these sectors are largely dominated by foreign entities so when a policy measure comes in and puts capitalisation at very high levels, it further pushes our locals out of business.
“The minimum requirements we are setting are large sums of monies for our indigenous businesses,” he noted.
“We first started with the banking sector where the minimum capital was supposed to be increased to GH₵230 million but was moved to GH₵400 million, then measures kicked in against savings and loans where the capitalisation has not increased but there are hints that it will go up and this was also followed by the microfinance industry,” he explained.
Tiering of banks
In order to create another opportunity for locals to enter the financial space, Mr Terkper proposed that the BoG should create a lower tier with lower capital in the banking sector.
“We have only three tiers currently which are; universal banks which have a minimum capital requirement of GH₵400 million, savings and loans which have a minimum capital requirement of GH₵15 million and the microfinance sector with a minimum capital requirement of GH₵2 million.
“Look at the gap between tier one and two. I don’t see the reason why there is obsession for everyone to be at GH₵400 million. We can create another tier with capital requirement around GH₵200 million.” he stated.
“At the moment if you look at the gap between tier one and two, I don’t know how many savings and loans can graduate and become banks,” he added.