The Senior Economic Analyst with DataBank, Courage Martey, has said there is the need for a concerted effort towards boosting financial literacy for Ghanaian workers, to enable them process simple economic information and make informed decisions about their finances.
His comment comes on the back of a ‘2020 Banking Industry Customer Experience Survey published by the KPMG.
The survey was carried out on 1,000 respondents and shows that 71 percent of depositors see banks as safer havens for investment than fund management companies.
Speaking to Citi Business News, Mr. Courage Martey said more financial literacy programs are needed to improve understanding and confidence in the country’s financial sector.
“The first thing on my list would have to be education. The financial institutions have to be able to communicate effectively with their clients or customers about the alternatives available to just keeping your money in a savings account. This will enable the customers have the opportunity to deploy their excess funds to earn some returns. The education must focus critically on risk analysis and I think this is where we have fallen short over the years,” he said.
“We have over focused on potential returns without understanding the risk associated with the level of returns that we look at. So, the education for me must focus a lot more on risk analysis. Retailers or investors should also take their time to do their window shopping around financial institutions before they finally decide where to save or invest their monies,” he added.
The ‘2020 Banking Industry Customer Experience Survey: Ghana Retail Banking Insights’ published by the KPMG also stated that only 14 percent of the respondents said they will consider investing in fund management companies, while the remaining 6 percent said they would keep their monies at home.
Struggles with Fund management companies
It would be recalled that the problems of fund management companies began in 2019 during the financial sector cleanup.
The financial sector clean-up, which was commenced by government in August 2017 led to the collapse of nine universal banks, 347 microfinance companies, 39 microcredit companies or money lenders, 15 savings and loans companies, eight finance house companies, and two non-bank financial institutions.
In November 2019, the Securities and Exchange Commission (SEC) akso revoked the licenses of 53 Fund Management Companies following the companies’ failure to “return client funds which remain locked up and in a number of cases, have even folded up their operations.”
The action was taken pursuant to Section 122 (2) (b) of the Securities Industry Act, 2019 (Act 929) which authorizes SEC to revoke the license of a market operator under some circumstances.
In a public notice released by the regulator, SEC said there were no other means of saving these companies than revoking their licences as they had largely failed to return client funds which remain locked up and, in a number of cases, had folded up their operations.
It also noted that the continuous existence of these companies, from the regulator’s perspective, posed severe risks to the stability of the capital market and to the interests of investors, hence, the decision to eliminate them from the system.
The industry has since been struggling as some depositors are yet to be paid by government.