Defunct fund managers want cash payments over bonds

The Ghana Securities Industry Association (GSIA) has appealed to government to pay customers of defunct fund management companies more in cash than bonds.

The appeal comes after the Receiver, Eric Nana Nipah announced that, with effect from Thursday, 2nd April, 2020, Consolidated Bank Ghana (CBG) will be issuing a government backed non-interest bearing financial instrument worth approximately GHc4bn to depositors of savings and loans and fund management companies.

But the GSIA, in a press release has expressed its dissatisfaction about the payment module, saying fund managers have received only Ghc83 million from the total Ghc1.87 billion locked up. Essentially meaning, only 7 percent has been paid in cash, hence, its call for more of the funds to be given in cash than bonds.

According to the Association, it has had a number of engagements with key stakeholders, namely; – the Securities & Exchange Commission (SEC), Ministry of Finance (MoF), Consolidated Bank Ghana (CBG) and the Receiver but to no avail.

“These engagements with stakeholders are still ongoing. Our goal is for our numerous clients to be given a higher cash portion. An increase in the cash component of the pay-out will ease the already tight liquidity situation in the sector and provide relief to these clients.

“We acknowledge the tight fiscal situation of the government. However, on behalf of our members and these clients, we are appealing to the government through the Ministry of Finance to urgently consider our request”, the statement read.

It further appealed for a speedy resolution of the issue to restore calm and bring relief to the sector.

Background

On 16th August 2019, the Bank of Ghana revoked the licences of 23 savings and loans institutions and 347 microfinance institutions as part of its banking sector clean-up exercise.

Investment management firms or Fund Managers had a total of Ghs1.87 billion locked up in these failed institutions.

This exercise was carried out with the assurance that no depositor or investor would lose their funds. There has been an ordered process since, with the appointed Receiver for the process of paying depositors and investors all or part of their monies after their balances have been reconciled.

The characteristics of the instrument were Zero coupon rate i.e. Non-interest bearing with a 5-year tenor and drawdown of 10 Equal installments every 6 months with March 31, 2021 as the first drawdown.

To date, more than Ghs1.43 billion of the Ghs1.87 billion exposure has been validated.