Deputy Finance Minister insists 96 percent of depositors have “been paid in full”

Deputy Finance Minister, Charles Adu Boahen has disclosed that 96 percent of depositors’ locked-up funds during the banking sector clean-up have been paid in full.  

He made this revelation in Parliament during the debate on the Mid-Year budget review regarding the financial sector clean-up and the consequent collapse of some banks and microfinance institutions.

 “We have also paid over ninety six percent of the depositors in the savings and loans, microfinance and banking sector; 96 percent of depositors have been paid in full. So it’s the remaining four percent who make the most noise that are still outstanding and are yet to be paid”.

Charles Adu Boahen

Mr. Boahen posited that 20 percent of the funds were paid via cash, while the remaining 80 percent were issued out as bond payment, iterating government acknowledgment of concerns over unpaid monies.

“In paying these depositors, we used a combination of bonds and cash, we paid them 20 percent in cash and 80 percent in bonds. The bonds were structured to pay out over four years amortizing… meaning they will be paid 20 percent on face value every year for the next four years”.

Based on high interest rates promised by the collapsed financial institutions, government would have borne high interest payment which depositors had attracted by investing in these financial institutions.

“We came up with this structure in recognition of the fact that we had to watch the public purse and make sure that we use the scarce resources we had judiciously. When we looked at the deposits of most of these depositors in these savings and loans and MFIs, we realize that depositors haven been attracted by the lure of very high interest rates sometimes exceeding ten percent a month”.

The Deputy finance minister revealed that the issue stems from the deception of high returns promised by these institutions which led to a throng of depositors being lured as a result of high interest rates.

“So basically, people had innocently gone to put their monies in these institutions believing that they were going to earn really high return, as compared to the more conservative people who had deposited their monies with better capitalized banks that were paying them, maybe one or two percent a month. So these depositors in these MFIs had accumulated very huge balances, but this was essentially not sustainable and that is why these institutions ended up in this manner”.

“We structured an instrument that re-paid the depositor for his principal and not for his huge interest accumulated based on what these savings and loans had offered at the time which they knew very well they could not sustain or provide”.

Government has currently GHC8 million submitted claims but they have had to go through court processes to gain permission which has caused undue delays in the resolution of the asset management firms.

“We find ourselves with a lot of investors whose monies are still locked up with these institutions. However, government has set aside GHC3.1 billion cedis to take care of these investors and depositors as soon as the court grants the receiver the authority to liquidate these institutions. And as soon as that happens, these depositors shall be paid”, he said.