The Second Deputy Governor of the Bank of Ghana (BoG), Elsie Addo Awadzi has challenged Special Deposit-taking Institutions (SDIs) to realign their operations with their core mandate of providing financial access to “the missing middle” — which is, small and medium enterprises that are not serviced by the banks.
“We expect the SDI sector to be the key delivery channel for financial inclusion — a key requirement for Ghana’s socio-economic advancement.
There are still many Ghanaians and businesses that do not have access to savings products and credit facilities and this presents opportunities for the SDI sector to grow,” Mrs. Awadzi said at a joint BoG/SDIs workshop for journalists in Accra.
According to her, the SDIs fill a big vacuum in the nation’s financial system with that sector contributing significantly to the nation’s socio-economic development considering the size of the market they serve.
In spite of the pivotal function they play in the informal economy, Mrs. Awadzi said there have been instances where SDIs deviated from their licensed mandate and operated as banks without the requisite capitalisation and risks expertise leading to their collapse.
“For a developing country like Ghana, this segment of our society forms the bedrock of our economy and can be harnessed and nurtured to become strong economic actors,” the second deputy governor said.
In 2019, an exercise to sanitise the SDI space saw the central bank revoking the licences of some institutions within that bracket, including the axing of about 347 insolvent microfinance companies and 39 microcredit companies.
Mrs. Awadzi stated that the cleansing was necessary to protect depositors, restore public confidence in that sub-sector and ultimately ensure the safety of the country’s financial system.
To avert the reoccurrence of such mass failures in the sector, she said the BoG has revamped its supervision of the SDIs with works on new governance and risk control rules underway.
The one-day media workshop was to bring journalists up to speed with the current status of the SDIs sector following the reforms embarked by the industry regulator as well as court the media’s support to grow the sector.
Tweneboa-Kodua Boakye, Executive Secretary of Ghana Association of Savings and Loans Companies (GHALSAC), in his remarks underscored the relevance of SDIs to national development adding that with the needed support, the sector will be able to drive the financial inclusion agenda.
Specialised Deposit-Taking Institutions (SDIs) sector are regulated under the Banks and Specialised Deposit-Taking Institutions Act of 2016 (Act 930) and licensed by the central bank to provide access to finance to segments of our society that would typically not be able to access financial services from commercial banks.
They are expected to accept small deposits and to provide small loans to micro, small and medium businesses and informal sector business operators.
As at July 2020, SDIs had dished out about GH¢ 5.7 billion in loans with their assets constituting 8.5 percent of total assets of the banking sector whilst their deposit base and loans made up 7.7 percent and 14.3 percent of the entire sector respectively.
SDIs currently operate through a total of 1,070 branches nationwide serving about 1.5 million individuals and businesses, offer thousands of jobs, and provide loans for businesses across various sectors of the economy.