BoG to pre-finance unpaid salaries of Microfinance ex-staff and Savings and Loans firms

The Bank of Ghana (BoG) has decided to pre-finance the full outstanding salaries and negotiated exit packages of former employees of the defunct 347 microfinance firms and 23 savings and loans companies as well Finance House firms.

This was announced in a statement by the Receiver, Eric Nana Nipah and also doubling as a Director of PricewaterhouseCoopers (Ghana) Limited (PwC).

According to Mr. Nipah, this is to alleviate the economic impact of the resolution exercise on former employees of the affected companies particularly in the era of the global pandemic, COVID-19, having affected individuals, businesses and economic activities in general.

The Receiver further stated that consultations are being made with authorized representatives of the former employees to agree on processes of payment, taking effect today, Monday, July 13, 2020.

Mr. Nipah again noted that he will only fully settle outstanding salaries and exit packages of former employees who have undergone validation and agreed to proceed with payment through a resolution process.

“To ameliorate the economic impact of the resolution exercise on former employees of these affected companies particularly in these times of COVID, Bank of Ghana has agreed to pre-finance the full settlement of employee-related claims which otherwise rank as Unsecured claims in the receiverships of these companies.

“The Receiver will in the week commencing Monday, 13 July 2020, engage with the authorized representatives of the ex-staff to agree on modalities for the payment of outstanding salaries and exit packages to ex-staff of these resolved institutions,” the statement said.

“In line with the hierarchy of creditor claims set out under Act 930, other creditors of the failed institutions will be settled by the Receiver upon validation of their claims and to the extent that the Receiver is able to realize value from the remaining assets of these institutions,” he said.

It could be recalled that following the revocation of the licences of the 347 microfinance companies and 23 savings and loans companies, a validation of the affected customers commenced on November 18, 2019, with the aim of repayment.

Accordingly, the Receiver is compelled to undertake a detailed asset tracking and forensics exercise in collaboration with the Economic and Organised Crime Organisation (EOCO) to locate and recover the assets of the insolvent financial institutions to auction and accumulate funds for settlement.

However, the receiver in the statement explained that though they are at the asset realization stage of the receiverships, “poor quality of assets of some of these institutions, asset diversion and misstatement of a significant number of assets of some of these companies in the financial records of these resolved companies are slowing the pace of recovery.”

“The consequence in pursuing this recovery route is that creditor claims including employee-related claims in the resolution of the affected MFCs and S&Ls are not likely to be settled any time soon,” he added.

On several occasions, the Receiver has also appealed to individuals, groups and institutions who took loan facilities from these firms to repay the loans immediately to aid in the recovery process.

Background

The Bank of Ghana, between 2017 and 2019, revoked the licenses of nine local commercial banks and over four hundred financial institutions comprising Micro-finance, Savings and Loans as well Finance Houses, for violating various regulations guiding their operations.

As a result of the revocation, it affected about 4.6 million depositors’ monies which could have been lost completely had the regulator not taken an action to that effect.

Starting in August 2017, the Bank of Ghana (BoG) gave GCB Bank Ltd the green light to acquire two local banks, UT and Capital bank due to severe weakening of their capital.

Later in August 2018, the Bank of Ghana consolidated five other local banks, bringing forth the Consolidated Bank Ghana Limited (CBG).

Later in May 2019, a total of 347 microfinance companies also had their licenses revoked by the BoG.

Additionally, the Central Bank, later in August 2019 again revoked the licences of twenty-three (23) insolvent savings and loans companies and finance houses, whiles the Securities and Exchange Commission revoked the licenses of over 50 Fund Management Companies.