News: A $1.6 Billion Nightmare As Investors Can’t Get Their Savings Out in Ghanaian Banks
Up to 70,000 people could be facing financial ruin after a massive government “cleanup” of Ghana’s banking system that reduced the number of lenders by a third, closed 23 savings-and-loans and triggered a run on banks which couldn’t sell their holdings fast enough to meet demand.
An estimated $1.6 billion has been wiped out. That’s more than 33 percent of the assets that private fund managers supervise for retail and institutional investors, Bloomberg reported. Ghana’s main financial regulator, its Securities and Exchange Commission, has increased pressure on at least 20 fund managers suspected of violating the rules.
Ghana’s SEC is blocking these money managers from accepting new investments, concerned they may use the funds to pay out existing investors.
“The government needs to step in to build confidence again,” said Lord Mensah, a senior finance lecturer at the University of Ghana, in a phone interview. “There’s nothing we can do apart from making sure that we create that necessary environment to regain investors’ confidence again.”
The chances are slim of the Ghanaian government bailing out burned investors, Bitcoinist reported. The central bank targeted the savings companies servicing the investors. Many are already blaming the government for not having a plan in place to prevent such financial fallout.
“The issue Ghana faces is more about having adequate system and controls in place to ensure that there is no room for such things to happen,” wrote Kwadwo Kusi-Frimpong, an expert in financial crime, governance and regulations, in Modern Ghana.
A Bank of Ghana report on savings and loans firms in 2019 identified weak corporate governance and weak board and senior-management oversight.
“From the key findings of the Central Bank, you can tell that most of these companies were not even on life support, they were walking zombies,” Kusi-Frimpong wrote.
That’s no comfort for Isaac and Bless Boahen, who saved for months to pay for Bless’s economics doctorate, only to be left empty-handed when it was time to cash in the investment.
They were promised a return of 26 percent a year on their investment, Bloomberg reported.
Written by Dana Sanchez