The Bank of Ghana is on a journey to clean up the financial sector and make the institutions working within it stronger.
Some banks have already gone under with many more microfinance companies being closed down for not complying with one regulation or the other.
As noble as the regulator’s intentions may be, there are some economists who fear the uncertainty this creates may discourage many people from saving.
Ghana’s savings culture is seen as one of the poorest globally, with fewer people willing to put money away in the banks for a rainy day.
A Senior Research Fellow with the Institute of Economic Affairs, Eric Osei Assibey explains to Starr Business why he thinks the regulator ought to tread cautiously in its clean up agenda.
“What is happening in the banking sector [with] some kind of instability, some microfinance collapsing and people not being able to get their deposits and some banks going down…kind of discourage people to save,” he said, adding “…the prudential supervision of the central bank should be strengthened to make sure that people have enough confidence in the banking sector so that they can save more for the banking sector to have enough money to on-lend.”
What was happening in the microfinance industry where many of such institutions are collapsing was really discouraging savings in the informal sector, he stressed.
According to him, one of the ways he thinks could make savings more attractive for the populace will be the establishment of a framework to determine how much banks pay on deposits.
Presently, the difference between what is charged on loans and deposits is vast, a trend Mr. Assibey says is affecting public confidence in banks.
He told Starr Business that “if you look at the spread between the saving rate and lending rate is so wide which doesn’t make savings attractive” encouraging the central bank to have benchmark to provide some positive returns on peoples savings.
“If that is done that can attract more savings.”