Mr Habibu Adam, a Senior Economist, on Tuesday commended the Bank of Ghana (BOG) for efforts to clean-up the microfinance sector by the second quarter.

He said after the major clean-ups in the universal banks; the Savings and Loans and the microfinance sector must logically follow as majority of Ghanaians almost 80 per cent of financial services clients deals with this category of operators.

Mr Adam who is also a Senior Economist at the Office of the Senior Minister, told the Ghana News Agency in an interview on the recent announcement by Dr Ernest Addison, BOG Governor, that it would embark on a clean-up of the microfinance sector.

The BOG Governor explained that the clean-up was to build a strong and vibrant microfinance sector and protect the investments of depositors in the sector.

Mr Adam however caution that, “care must therefore be taken in handling the lower tiers of the financial sector – Savings and Loans and the Microfinance, as any uncoordinated exercise could lead to panic withdrawals leading to a possible closed down of financial services to many parts of the country”.

The Senior Economist however suggested that BOG should consider concentrating on the monetary policy role and create an independent body to play the supervisory role.

“The Alternative is to create a separate body to supervise and regulate the lower tiers while it concentrates on the Tier one financial institutions and its monetary policy,” Mr Adam stated.

The Senior Economist at the Office of the Senior Minister recounted that the decision to clean-up the universal banks was given political backing as it was costly, which the BOG could not bear.

“With the support of the government, the Governor carried through the clean-ups which costs the tax payer about GH¢12.7 billion in the form of liquidity support to the banks prior to the exercise and additional monies raised to provide liquidity and protect over 1.5 million depositors with deposits in excess of over GH¢11 billion,” he said.

Mr Adam said, “it is important to acknowledge that the clean-up has resulted in improvements in industry’s solvency measured by the Capital Adequacy Ratio (CAR), which has increased to 21.9 per cent at the end of December, 2018 significantly above the prudential requirement of 10 per cent.

“Asset quality has also improved with Non-Performing Loans (NPL) ratio declining from 21.6 per cent in 2017 to 18.2 per cent in 2018 mainly due to the implementation of loan-loss write off policy”.

Meanwhile scores of Public and Civil Servants at the Ministries in an interview with the GNA applauded the BOG target to clean the microfinance sector.

The Public and Civil Servants noted that, some microfinance and saving and loans companies have taken advantage of the vulnerability of the public workers, offered them attractive loan packages but, ended up slapping on them huge interest rate.

Mr Ibrahim Musah, an Accountant, appealed to BOG to manage information flow expediently to reduce any panic withdrawal which was associated with the universal banking clean-up.

He explained that, the financial sector was very fragile as a result of the shake-up in the universal banking sector, “we must therefore be circumspect during the clean-up to avoid a backlash”.

Mr Frank Atiase of the Communication for Development and Advocacy Consult (CDA Consult) urged BOG to adopt a proactive information management mechanism to ensure that all stakeholders understood the exercise.

He said BOG must release consistent and strategic information to shareholders, owners, customers and the general public on the intended clean-up; “the public need to understand in specific terms what it entails.

“Reduce the financial terminologies and communicate to the people especially clients of these lower Tier dealers of the implication of the clean-up; the safety of depositors, and staff security among other issues”.

Mr Atiase urged BOG to launch public education campaign on the modalities for the clean-up across the country in major Ghanaian languages as well as English.

He however appealed to the public to remain calm, seek for information and avoid misinformation through social media platforms.

The microfinance industry is going through financial difficulties with some unable to fulfil their financial obligations to clients when due, endangering the depositors.

Dr Addison explained that, BOG was holding discussion with Ministry of Finance on the modalities for the clean-up; “we are yet to agree on the exact date to begin the exercise”.