Fidelity bank,ProCredit merger sparks new ‘craze’ in banking industry

The banking sector is likely to be hit with a new ‘craze’ where universal banks will begin acquiring savings and loans companies as well as microfinance companies.

Fidelity bank became the first Ghanaian bank to make the move early this week after announcing it had acquired ProCredit Savings and Loans company.

The deal which is yet to be approved by the Bank of Ghana and shareholders of the bank will see Fidelity bank purchasing all shares held by ProCredit’s two shareholders PCH and DOEN Foundation of Netherlands.

Full integration of ProCredit, which has operated in Ghana for 12 years,  to Fidelity bank will be completed next year.

New craze

Universal banks in the Ghanaian banking industry in the history of the country, usually acquire or merge with other universal banks and not savings and loans companies, rural community banks  or microfinance institutions.

Most acquisitions or mergers seen so far have been between local and international universal banks.

This is the first time a local bank, is acquiring a foreign savings and loans company in the country.

Banking consultant and Principal Consultant at Osei Tutu II Centre for Executive Education & Research, Nana Otua Acheampong tells Citi Business News more of such acquisitions will be seen in the banking industry soon.

‘the chances are that we are going to see more of that rather than less of that, for the simple reason that there are four structures in the bank financial institutional sector in Ghana at the top is the universal banks, then we have the savings and loans companies, the rural community banks then the microfinance each of these sectors is serving a niche market or a set of clients and therefore if a universal bank now moves to the second structure  and buys one then now they are seeing that they can combine the niche they have in the universal banking sector to the savings and loans sector and the chances are that they will move down the structure from the universal bank to the savings and loan then to the rural community bank then the microfinance’.

But this is not Fidelity bank’s first move to acquire a financial institution.

The bank last year was one of few banks that begun moves to acquire Merchant bank.

Its acquisition of ProCredit will see  it expanding its branch network to 80 across the country, with 96 ATMs, 300 agencies and more than 700, 000 customers across the country.

Nana Otua Acheampong adds the move will help banks to grow, integrate and expend their business in what he describes as the ‘vertical integration’….. ‘this way you are building what we call vertical integration you are integrating, expanding and growing vertically within the same industry but at  different sectors in the industry.

Credibility concerns

Approximately 30 unnamed microfinance institutions (MFIs) collapsed in Ghana during the first quarter of last year due to their inability to sustain their operations.

Most customers of these institutions did not have their monies refunded to them because owners could not be traced or the companies did not have the funds to pay them.

Similar incidents have also been reported in the savings and loans sector as well.

The developments have left a dent in the credibility of the two sectors.

But Nana Otua Acheampong believes the acquisition of savings and loans companies as well as microfinance institutions by banks will restore credibility in the two sectors.

‘if nothing at all it gives credibility to the savings and loans company where they are now being partnered by a recognized universal bank which has more clout’. he said.

By:  Vivian Kai Mensah/citifmonline.com/Ghana