Thursday, April 28, 2011

Banks urged to re-strategise risk management system

Banks in Africa have been advised to re-strategise their risk management system to enable them provide loans to viable businesses.

Speaking at the two-day 2nd annual African Banking & Financial Institutions Conference in Accra on Wednesday, John Gibling, Managing Director of Financial Institutions Ratings of Standard and Poor’s, said most banks in Africa have had high interest rates because they do not know their customers very well to tailor their products to meet their specific needs.

The conference is targeted at financial services executives representing a wide range of institutions with a strong desire to stay abreast with evolving global regulatory issues, enhance technical knowledge and exploit growing financial services and opportunities.

Using South Africa as a case in point, John Gibling noted that the country was able to manage the global economic crisis due to the good risk management system it has in place.

Explaining further, Mr Gibling told Myjoyonline.com: “When you understand your customers you can differentiate on pricing. [A bank can] say this customer has a very high risk and therefore the interest should be very high. On the other hand, there are others in the community, which may have very good risks, may have good cash flow, they may have good jobs and therefore the interest rate they should be charged should be lower.”

By so doing, he noted, the financial institutions could bring more people into the banking sector and increase the economic wealth of the country they operate in.

He also advised the non-formal sector to develop confidence in the banks, which he said are safer in keeping their money.

Malcolm Buamah, Managing Partner of First Vault, a UK based private consultancy who are the organizers of the conference, told Myjoyonline.com that the conference was instituted after the global economic crisis to look at new opportunities, financing, regulations and risks in the banking sector.

“What the conference is attempting to do is to move forward from that position and to see what is happening, what is likely to happen and what the future trends are likely to look like,” he explained.

The conference is expected to cover technical issues stemming from the global regulatory revolution including but not limited to Basel III, Solvency II, stress tests, regional sovereign risk, macro-economic trends, projections, capitalization, liquidity, governance, risk management, compliance, money laundering among others.



Source: Myjoyonline.com

GIPC registers 109 projects in first quarter of 2011

The estimated value of projects registered by the Ghana Investment Promotion Centre (GIPC), for the first quarter of 2011 is up 101.13 per cent and worth GH¢567.66 million, from GH¢263.42 million for the same period in 2010.

The Centre registered a total of 109 projects for the period compared to 108 projects, a year ago.

Mr George Aboagye, Chief Executive Officer of GIPC, who announced the figures at a press briefing in Accra, on Wednesday, said the success was achieved on the back of investment promotional missions abroad and on the domestic front.

Out of the 109 registered projects, 66 were wholly-owned foreign enterprises and 43 were joint ventures between Ghanaians and foreign partners.

The joint venture projects were valued at GH¢392.58 million and the wholly-owned foreign enterprises were valued at GH¢175.07 million.

This compares with 63 wholly-owned foreign enterprises and 45 joint ventures registered in the first quarter of 2010, valued at GH¢217.83 million and GH¢45.59 million respectively.

The Foreign Direct Investment (FDI) component of the estimated value of the projects registered during the first quarter in 2011 amounted to GH¢527.63 million and the local currency component of GH¢40.02 million.

India registered the highest number of 19 projects, while a joint venture between Britain and Belize topped the list of countries with the largest value of investments in the first quarter, worth $70.50 million.

The registered projects in the first quarter are expected to create a total of 7,004 jobs, up from 6,122 jobs in the first quarter of 2010.

Out of this, 6,497 jobs would be for Ghanaians and the remaining 507 for expatriates.

Mr Aboagye said the Centre would step up its missions and campaigns, leveraging on the improved perception of the country as a safe investment destination and the democratic credentials.

He said various investment missions to Europe, Asia and North America and the hosting of Jareco General Construction Limited from Dubai had been lined up to draw attention of big industrial players to opportunities available in Ghana.



Source: GNA

GIPC boss urges persuasion in part-indigenization of foreign firms

The Chief Executive of the Ghana Investment Promotion Centre is uncomfortable with current proposals for the part-indigenization of foreign firms seeking to establish local operations.

George Aboagye is proposing that such firms be encouraged to cede part of their ownership rather than being compelled with legislation.

Those calling for the part-indigenization policy insist that legislation must be used so Ghanaians can also share in the massive profits that some of the firms churn out from their local operations.

But the GIPC boss told Joy Business if it not well-managed, the policy could prove a turn-off for potential investors.

“Investments are moving across the globe and in a competitive way, you have to try and attract these investments into your country; capital moves to places where it is welcomed and it is free to move around and it is free to do what it wants to do in order to make profits,” he said.

Using legislation to compel potential investors to give local partners shares can be a disincentive to foreign investment in the country. "You cannot force marriages and expect peaceful co-existence," he counseled.

Mr Aboagye questioned the capacity of local businesses to buy stakes in foreign companies.

Government is currently working on a policy that will require companies seeking to establish or already operating to cede part of their ownership to Ghanaians.

The Securities and Exchange Commission is currently reviewing proposals to get some of the companies to offload some of their shares on the local bourse.

Ahead of that however the Communications Ministry has already introduced a directive that will compel firms managing infrastructure in the telecoms sector to cede thirty percent of their businesses to local firms.



Source: Joy Business/Ghana

US$100m fund for new companies

The Venture Capital Trust Fund (VCTF) will launch a US$100million fund called the "Angel Fund" in July this year to create opportunities for start-up companies in the country.

"Start-up companies with a good track record, skills and profitable venture can access the fund," said Mr. Daniel Duku, Chief Executive Officer of VCTF, in an interview with Business and Financial Times.

Mr. Duku explained that the Fund recognises the need to complement government's efforts toward supporting Small and Medium Enterprises (SMEs) and will continue to secure additional funding through the Public Private Partnership (PPP) model.

"A model which is the first of its kind wherein a government institution has leveraged its resources with the private sector to create more funds than it was endowed with.

“We intend to embark on an investor drive to attract local and foreign strategic investors to put more money into the Fund," said Mr. Duku.

He said the VCTF will intensify its monitoring efforts, as well as collaborate with top educational institutions, to build capacity for its portfolio managers through entrepreneurial development and capacity building programmes to ensure efficiency.

He said the VCTF will encourage and support fund managers to list on the Ghana Stock Exchange and establish Venture Capital SME roundtables in all the regions to enable portfolio companies and potential entrepreneurs to network.

He said the VCTF will also intensify its public awareness campaign to educate SMEs on the benefits of equity investment and attract more funds from financial institutions.

In 2006, the VCTF was set up by government through an Act of Parliament with two mandates - to provide capital to SMEs and to promote the development of the venture capital industry in the country with a seed capital of GHc22.4million provided by government.

The Fund now operates with capital of GH¢83million raised through its partnership with local and foreign investors.

Since its establishment, VCTF has invested over US$17million to 39 portfolio companies and created over 1,000 direct jobs in the participating communities and farmer-based organisations.

The Venture Capital Trust Fund monies are made available to SMEs through inter mediation by Venture Capital Financing Companies.

A Venture Capital Financing Company is a company incorporated under the Companies code 1963 (179) and has as its sole authorised business providing assisting in the development of Small and Medium Enterprises by making equity and quasi-equity investments, and providing technical and managerial expertise to these small businesses in which it has made or proposes to make an eligible investment.

In practice, the Trust Fund is a source of funds and operates through institutional partnerships by means of joint venture arrangements that establish Venture Capital Finance Companies (VCFCs).

Each VCFC is comparable to a small fund. VCFCs are managed by Fund Managers who act as GPs to the partnership and are licenced by the Securities and Exchange Commission (SEC).

Fund Managers are responsible for deal sourcing, selection, monitoring and exit of Fund investments. However, final investment decisions rest with the Investment Committee (IC) of all Funds. ICs are made up of representatives of Investors and mostly include independent Professionals who are appointed by the Fund’s Board of Directors to protect Investors’ interests.

VCFCs are encouraged to invest in all sectors of the economy, but are precluded from investing in businesses that engage in imports to sell. The maximum funding limit is 15 percent of total capitalisation of a VCFC and a minimum of US$25,000.

For purposes of VCFC investments, an SME is defined under the VCTF ACT 680 as a business whose total asset base, excluding land and building, does not exceed the cedi equivalent of US$1.0million.


Source: Business and Financial Times

Private equity fund managers counsel prudent management

Private equity fund managers say profitability and how well a business is managed are the two key factors that will get them to invest in any entity.

The fund managers were speaking during a breakfast meeting put together by the Business World magazine on “Attracting private equity and venture capital into your business”.

Start-ups and existing businesses are being asked to turn to private equity funding because of the difficulties they encounter accessing funds from the banks.

Many businesses however argued that they find it increasingly difficult.

But Managing Partner with Aureos Capital, Jacob Kholi told Joy Business the seemingly frustrating requirements are needed to ensure they get their investments back.

“We are not lenders, we don’t take collateral to back our investments, we are partners, we are shareholders, we carry the burden of the company and so we need to be careful in the selection process because we are going into a partnership and you should know who you are going to bed with,” he said.

According to him, companies and individuals undertaking equity funding have “to evaluate the business risk, [assess] the opportunity to identify what the challenges are in order to make a decision to go into it.”

He said business owners who want equity partnership must be transparent to attract the needed partnership.



Source: myjoyonline.com

Micro Finance Credit Up

Despite persistent complaints by the private sector of a squeeze in credit, there has in recent times been an explosion of finance in the micro finance sector.

The Chief Executive Officer of Dalex Finance & Leasing Company Limited, Mr. Kenneth Kwamina Thompson, in an interview with Business and Financial Times observed that the expansion of credit to the sector is a good thing.

As at 31st March 2011, Survey of Apex Bodies indicate that at least 200 microfinance companies operating under the Money Lenders Ordinance had registered with the Association of Microfinance Companies. However, estimates of over 1,000 such companies exist throughout Ghana. Some individual Susu Collectors have graduated into such companies. In the informal financial sector, at least 2,000 Susu collectors have registered with the Ghana Cooperative Susu Collectors Association, but estimates of over 5,000 exist nationwide. “In the light of increasing complaints by Ghanaian entrepreneurs that lack of access to credit hinders growth, the proliferation of financial institutions that provide entrepreneurs easy access to credit is a positive development; however, regulation needs to be formalised to minimise the risks to both lenders and borrowers.”

Most organisations operating in the sector are typically owned by people who themselves are not involved in the day to day management, as they have other commitments. The micro-finance institutions, usually located in marketplaces such as Kasoa and Agblogbloshie, advance loans with interest rates ranging between 10 – 30 percent per month. Money is lent to individuals, but mainly to groups with no security required except for reliance on the collective responsibility of the group to ensure repayment.

The main issues of concern to the micro finance institutions include how to keep their operational costs down as monitoring costs are high whilst staff wages, which are typically low, could affect risk assessment. “The expansion of credit is good for the national economy as it helps nurture businesses; however lessons can be learnt from the Indian state of Andhra Pradesh” Mr. Thompson noted.

In India, the head of a network of private micro-finance companies predicted that India's roaring private micro-finance industry will hit the buffers. He was worried by the reckless lending and feckless borrowing by micro-credit companies and villagers respectively. This has now led to borrowers defaulting on payments and taking their lives, and banks cutting off lending to the cash-strapped micro-loan companies.

At the root of it, many say, is the increasing greed of the private micro finance industry in India. Some of these companies are atrociously profitable. They lend more and more money to the same people, who then renege on repayments. Also, the uses of small loans have changed over the years, with mixed results. In the beginning, the loans were given out to help small traders sell vegetables or buy livestock, or for basic farming needs.

In recent years those farming commercial crops (cotton, groundnut, vegetables) or larger livestock (high-yielding buffaloes and cows) received micro-credit. Industry experts say this is all very well, but requires the borrower to be more astute about handling the "assets" bought with the loans. Also, small farmers often lack the education needed to handle "income shocks" arising from one bad crop or a glut in the market, leading to a lowering of prices.

But what has made the situation worse, say analysts, is that micro-loans have been given away freely to villagers to build homes, repay old debts, buy consumer durables like TV-sets and pay for family marriages. The bulk of the current micro finance lending is towards consumption. Now a state government has pushed through a tough new law that seeks to regulate the industry. These lessons affect an organisations level of risk and sometimes have more direct social consequences.

Mr. Thompson disclosed that, as a non-bank finance institution, Dalex Finance believes that, as a way forward for the industry, some form of annual inspection akin to the supervisory regime of the Bank of Ghana should be looked into. He observed: “If the industry contracts due to defaults, borrowers will be driven to money lenders who charge higher interest rates and have more unorthodox loan monitoring and collection mechanisms.”

There is also need for intensified public education on the industry; addressing questions on whether the Ghana Police is adequately resourced to vet applications of Lenders; and whether the industry provides opportunities for money laundering. Over the long-term the establishment of institutions similar to the Citizen Advice Bureaus in the UK, which amongst other things provide independent legal advice to borrowers, would be helpful.

Mr. Thompson noted that the future looked promising for Dalex Finance, which is a wholly Ghanaian owned company. Established in 2005 and headquartered at the Ringway Estates in Accra, the company has over 50 full-time employees, 270 Sales Executives and branches in Asylum Down, Accra, Kumasi and Takoradi. An office in Tamale is expected to be opened in July.

Dalex Finance provides business loans and loans to government workers, as well as operating leases, mainly for vehicles to companies in the telecoms, mining and oil and gas sectors.

Source: B&FT

SMEs need local government intervention - Mr. Turkson

The Chairman of the Association of Small Scale Industries (ASSI) in the Western Region, Mr. Douglas Turkson has urged metropolitan, municipal and district assemblies to empower their members through education, sensitization and orientation programs to make them more responsible in their planning and development activities.

He said Small Micro Enterprises need coaching to make them attractive to enable them access loans, as well as for police makers to take them serious and put in place measures to cater for their needs.

Mr. Turkson was addressing a workshop on Small and Micro Enterprises in Takoradi in the Western Region on Tuesday.

It was to address the challenges that SMEs of the Western Region face and also create a favorable environment for sustainable development of SMEs.

He acknowledged that the Western Region is now at the center of major development opportunities that require well thought-out sustainably initiatives to enable entrepreneurs maximize the benefits that would accrue from the emerging oil and gas industries.

He noted that SMEs can function as suppliers to large companies and thus serve as a major source of revenue to the local government authorities.

Mr. Turkson attributed poor financing of SMEs operation to lack of proper record keeping.


Source: myjoyonline.com

DANIDA and ARB Apex Bank sign $15 million agreement

The Danish International Development Agency (DANIDA) and ARB Apex Bank Limited, on Friday signed a $15 million agreement for Ghana’s private sector development.

Mr Jan Poulsen, Head of Mission at the Danish Embassy, who signed for DANIDA, said DANIDA was interested in helping to create sustainable jobs for people in the private sector to improve their living conditions.

He said the agreement signified a continued partnership between Denmark and Ghana and everything would be done to further build stronger relations between the countries.

Mr Poulsen said the $15 million package, an equivalent of about GH¢22 million, was to help the Bank to operate from 2011 to 2014 to develop the private sector and expressed the hope that the assistance would achieve its intended purpose.

Mr Eric Osei-Bonsu, Managing Director of ARB Apex Bank, who initialed for the Bank, said DANIDA’s assistance to rural banks begun in the 1990’s when the banks were supported with funds to undertake training needs and assessments.

He said human resource development of rural banks as well as capacity building of the staff of ARB Apex Bank was critical to any developmental initiatives, therefore, the assistance to improve the private sector would go a long way to enhance rural banking.

Mr Osei-Bonsu said if the Rural Community Banks (RCB) were merged, it would help serve the purpose of creating a very solid financial institution capable of meeting the various business improvement requests by RCB clients in their catchment areas.

He expressed the hope that the ideas and intentions envisaged in the Bank’s programmes would serve as a positive driver in the operational sustainability and progress of the rural banking sector.

Mr Osei-Bonsu thanked the Government and people of Denmark for their continuous support to Ghana and gave the assurance that the bank would build stronger bridges to ensure that the relations were strengthened.


Source: GNA

Wednesday, April 20, 2011

Book Review

Title: Microfinance and Poverty Reduction: The Experience of Ghana

Author: Dr Joseph Kimos Adjei

No. of pages: 211

Publisher: Bold Communications Limited

Information on microfinance may abound in many books but when it comes to giving comprehensive insight to and making thorough analysis of the microfinance sector in Ghana, there may be no other book than the one titled ‘Microfinance and Poverty Reduction: The Experience of Ghana’, authored by Joseph Kimos Adjei, an academic and a practitioner in the field of microfinance.

The book is simply a masterpiece produced from long years of academic inquisition into and practical experience of the microfinance sector in Ghana. With long years of experience as credit manager in three prominent financial institutions in the country and a doctoral thesis on the subject, the author succeeds in breaking down the theoretical and practical intricacies of microfinance in general and the Ghana case in particular to the understanding of even those who may have low appreciation of microfinance. Coming in a beautifully-designed cover, the book is cast in eight main chapters. With a rich research background, the author spices the book with relevant graphs, tables, figures, academic references and scientific analyses that make the book very interesting reading. As the Executive Secretary of the Ghana Microfinance Institutions Network (GHAMFIN), Dr David O. Andah, who wrote the foreword to the book puts it, Microfinance and Poverty Reduction: The Experience of Ghana is “a must-read book for anyone interested in microfinance”. Indeed, the book is a masterpiece that players in the microfinance sector, researchers, lecturers and students of banking and finance, development studies and public policy will find more costly to forgo than to acquire at any price.

Chapter 1

The first chapter provides clues as to how microfinance could be used as an effective tool for poverty reduction. Microfinance programmes throughout the world have been adopted by various institutions in the developing world as one of the key strategies towards the reduction of poverty. In this regard, governments and developing partners have contributed in diverse ways resources to support the microfinance sector to expand their operations and increase the depth of outreach. Over the past three decades, various governments have adopted varied strategies including short and long term measures to address the problem of the high prevalence of poverty in their countries. These strategies include the technical assistance and funding for micro-credit activities and the creation of of an enabling environment for key players to provide financial services to the poor to improve their livelihood. The author gives a vivid overview of poverty reduction strategies in Ghana from 1980 to 2008, and the role of microfinance in reducing poverty in the country. The author observes that for most micro and small entrepreneurs in Ghana, the lack of access to financial services “is a critical constraint to the expansion of viable micro-enterprises”. Microfinance institutions have been allowed to operate and play a role in poverty reduction through the provision of small loans, savings and insurance products, money transfer and other financial and non-financial services to enable the poor generate income, build assets, and improve on their housing structures and related facilities.

Chapter 2

In chapter two, the author evaluates the development and success factors of microfinance in general, and makes a very intriguing comparison between micro-credit and microfinance. This chapter covers the development of the microfinance industry from the early 1980s when the focus was mainly on credit and other important financial services required by the poor were not provided. It also examined the era of state intervention in providing financial services to farmers and other disadvantaged individuals with poor repayment records, as well as contemporary times when most commercial banks and other non-bank financial institutions have deemed it necessary to enter this growing and profitable but competitive market. The innovative mechanisms and the unique methodologies adopted by microfinance institutions have also been explored. Challenges confronting the formal commercial banks who have ventured into the microfinance market were covered. Finally, ways by which these institutions, that had hitherto ignored this important sector of their economies, could chart a course into the sector have also been identified.

Chapter 3

In chapter three, Dr Adjei exhibits his rich understanding of theory and practice in microfinance by providing readers with evidence-based effects of microfinance programmes on poverty reduction and asset building. The chapter examines the empirical literature on microfinance and its effects on poverty reduction in general. The review placed a large emphasis on studies in South East Asia especially Bangledesh, where formal institutional microfinance programmes started and where we have a large body of literature on the effects of microfinance on poverty reduction. There are also some studies from sub-Sahara African countries including Ghana. The review of existing works by various authors and researchers confirms the conflicting and mixed results of the effectiveness of microfinance as a poverty reduction strategy. Notwithstanding, microfinance has emerged globally as an effective strategy for poverty reduction with the potential for far-reaching impact in transforming the lives of poor people. Overall, the review indicates that there is a common acceptance of the important role microfinance institutions are playing in poverty reduction efforts in developing countries. It has, however, been observed that most of these programmes are not reaching the very poor. It is further noted that such people could benefit from microfinance progammes only if such programmes are well-designed and targeted specifically at the poorest with some form of social welfare component attached.

Chapter 4

Chapter four of the book deals with contextual issues affecting microfinance in Ghana. The author examines some factors of poverty, such as population, the economy and inequality. He also discusses the geographical disparities in poverty levels, gender dimensions of poverty and policies to support microfinance programmes.

Making references to World Bank and Ghana Statistical Service data, Dr Adjei observes that although Ghana has achieved impressive economic growth rates since 1991, “poverty incidence and depth in the country remain high”. He enumerates many programmes introduced at various times with the view to reducing poverty.

These interventions include the Rural Finance Project, Rural Financial Services Project, Microfinance and Small Loans Centre and Ghana Microfinance Policy. Even though various programmes and policies have been adopted to reduce the incidence of poverty, not much has been achieved. As part of the strategy to solve this problem, government have placed greater emphasis on microfinance under the GPRS I and II and have also put in place an enabling environment for the microfinance sector through a microfinance policy document.

Chapter 5

Microfinance in Ghana has come a long way, and for people who may have little or no knowledge about the history of the sector, the author provides in chapter five of the book an in depth information on the evolution of microfinance in the country. In this chapter an overview has been provided of the important roles being played by various microfinance institutions in Ghana. As part of the strategy to reduce the level and incidence of poverty in the country and, therefore, attain some of the objectives of the Millennium Development Goals, the government has placed greater emphasis on microfinance by putting in place an enabling environment for the microfinance sector. We examined the evolution of the microfinance sector in the country to its current status. It must be noted that microfinance institutions in Ghana are arranged in three tiers, namely the formal, semi-formal and informal players. These institutions play important roles in the socio-economic development of the country, especially in the area of income generation, employment and poverty reduction. Through the provision of credit, savings and insurance products as well as non-financial services, most beneficiaries especially women, are able to expand their businesses and generate income to support their households.

Chapter 6

Having given such vivid account of the evolution of microfinance in Ghana, the author makes the book a class act by bringing readers up-close to the operations of microfinance institutions. Presenting a case study of Sinapi Aba Trust (SAT) in chapter six, he measures the depth of SAT’s outreach programmes through a survey that gives a better appreciation of the positive contributions of microfinance institutions. The results of the study indicate that, in general, SAT microfinance programme targets a disproportionately smaller number of the very poor in its operational areas, with approximately 46 per cent of its clients classified as less poor. These results are informed by the mission and objectives of the organization, the products and services it offers, as well as its policy of branch placement. The poverty assessment tool used for the analysis relies on varied poverty indicators reflecting the multi-dimensional nature of poverty and also offers an objective method for summarizing the overall poverty information of each household and unambiguously ranking these household by their relative poverty levels. Even though the method adopted for the analysis does not provide information on the absolute level of poverty of the two groups of respondents, it must be noted that, in most cases, it is the relative rather than the absolute poverty that is of concern to policy-makers and researchers.

Chapter 7

Focusing on microfinance, asset building and poverty reduction, the author makes another case study of SAT in chapter seven, examining the determinants of borrowing from SAT, while analysing the effects of its programmes on clients in terms of financial, human and physical capital/assets. The chapter examines how participation in a microfinance institution enabled established (old) clients to build up assets in the form of financial, human and physical capital in comparison to the new clients of the programme. The study found out that the size of loans is the key determinant of positive programme effects on participants. It was also observed that the level of education is positively related to the acquisition of household durables and that, most often, clients who are well educated normally serve as executive members of the various trust banks, and may be rewarded with larger loans for the assumed responsibilities. Another major finding of the study is the little or non-significant effect of the length of time with the programme on the outcomes variables. Generally, the findings of this study are consistent with other studies carried out by various researchers in Africa and South East Asia especially Bangladesh. It must be emphasized that even though these findings were obtained within the Ghanaian context, they could be applicable to microfinance institutions operating in other developing countries throughout the world.

Chapter 8

In tune with the adage that the past guides the future, the author peeps into the future in chapter eight, the last chapter of the book, as the author discusses some challenges facing the microfinance sector in the country and the way forward. The notes that the key challenges confronting the microfinance sector in developing countries, including Ghana, are capacity building; inadequate and expensive infrastructure base; poor credit delivery and management; inability to properly target the vulnerable and marginalized, research, monitoring and evaluation. On the way forward, the author underlines the need for microfinance institutions to expand access to commercial sources of funding in order to enlarge their operational tentacles. Furthermore, there is the need for microfinance institutions to develop the requisite skills and build good corporate governance, as well as dynamic and mission-oriented management to ensure efficiency.

Where to Obtain a Copy

Copies of the book can be obtained from the various public universities (i.e. University of Ghana (Business School, ISSER and the Bookshop) University of Cape Coast (Department of Economics); Kwame Nkrumah University of Science & Technology (KNUST Business School); University of Development Studies (both Tamale and Wa campus), UCC, KNUST, UDS) and selected bookshops across the country, as well as the offices of the National Banking College, GHAMFIN, Chartered Institute of Bankers, http://www.amazon.com and branches of HFC Bank where HFC Boafo Microfinance Services Ltd operates. One can also obtain copies from the publisher or the author.

Price: GH¢ 30 (Thirty Ghana cedis only).

Monday, April 11, 2011

"Credit Union Are Not Meant For Loans"

The credit union concept is to encourage the habit of savings and not purposely for granting loans to members, Mr Samuel Annor, Manager of the Central Region Chapter of the Credit Union Association (CUA) has stated.

He said it was unfortunate that in Ghana credit unions were associated with acquisition of loans mainly and urged the leadership of the societies to educate their members and the public to correct the misconception.

The CUA Chapter Manager gave the advice at a three-day management training workshop for the Board of Directors and members of the Committees of the Edwumapa Co-operative Credit Union established by the Mfantseman Municipal Assembly at Saltpond.

The Sub-committee on Gainful Employment (SPGE) of the International Labour Organisation’s Decent Work Project sponsored the workshop.

Some of the topics treated were; the credit union structure, credit union and CUA relationship, roles and responsibilities of credit union board, functions of loans and supervisory committees, and credit union policy.

Mr Annor, who facilitated the workshop, said credit unions should be regarded as a business which needed proper and efficient management.

He said he expected to see the Edwumapa Co-operative Credit Union growing to become one of the best in the region.

Mrs Grace Nicholls, Chairperson of SPGE said their mandate was to support the informal sector of the economy to grow, hence their decision to sponsor the workshop to prepare the credit union to thrive and contribute to the growth of the informal sector of the economy.

Mr John Etuah, Municipal Budget Analyst advised the participants to take the workshop seriously and be well vexed with the rules and regulations of the credit union concept since they held the key to the success of the body.

He urged them to, as much as possible; enforce the laws without fear or favour.

Mr Tsetse Arthur, Chairman of the Board of Directors appealed to the SPGE to provide allowances to people who would be invited to workshops as “going home with empty hands” after spending three days was very demoralising and would not encourage participants to respond to future invitations.


Source: Peacefmonline

ECOWAS reviews regional investment laws

A technical meeting to harmonize the investment laws in ECOWAS member states has ended in Port Novo, Benin.

The six-day meeting enabled the participants to compare the framework Community Investment Code (CIC) with the investment laws of member states, and use the reports of the national consultants to determine areas of convergence and divergence.

During the meeting, Peter Oluonye of the Directorate of Private Sector who represented the Commissioner for Macroeconomic Policy, Professor Lambert Bamba, recalled that the Commission had engaged the national consultants to conduct a study and analysis of the investment laws of their respective countries.

Their reports, he said, would constitute the basis of the harmonization process and enjoined them to demonstrate the same diligence with the next phase of the process guided by the realization that the treatment of investment in a single economic space will position ECOWAS as a competitive destination for investment in the global market.

The Framework CIC provisions were later reviewed comprehensively against the provisions of member states' respective constitutions; commercial laws sector codes and national investment codes.

The experts agreed that the spirit of the Framework CIC converges with most provisions in the member states' investment laws, a situation that paves the way for the re-drafting of the framework CIC document into investment code for ECOWAS, based on the outcome of the meeting by the national consultants.

Source: BF&T

ECLOF launches new unit

ECLOF-Ghana has launched a business development services (BDS) unit by which it aims to provide non-financial services that are vital to the development of sustainable microenterprises.

It is a Christian development organisation born out of the Christian Council of Ghana and belonging to the ECLOF global family with its head office in Geneva.

The principal aim of the BDS unit is to raise financial literacy levels, as well as managerial skills, among ECLOF’s clients by teaching new knowledge, skills and attitudes expected to bring about changes in money and management behaviour.

The BDS unit has a target of taking a minimum of 5,000 clients through this imperative exercise.

Currently ECLOF-Ghana has over 7,500 clients, with a portfolio of over US$1.5m; and with its policy of bringing finance and non-financial services close to its clients, ECLOF aims at broadening its presence countrywide, which currently stands at twenty outlets in five regions of the country.

ECLOF’s core business remains the provision of financial services to the unbanked in the country by providing micro, small and medium size enterprises (MSMEs) access to credit, building lump-sums, financial literacy, and insurance.

The BDS will additionally serve as a tool to promote financial inclusion, enabling people to take greater advantage of the financial services available to them. The business education is expected to translate into such actions and offer insights to help in transforming the lives of clients in particular and the entirety of the informal sector.

The BDS is organised by well-trained officials with requisite participatory learning skills. Training is held in ECLOF units and during meeting schedules on the field. Each client has an attendance book that is marked.

Upon full completion of a 10-module course, clients are awarded with certificates. Very good participants are then used as resource persons, and they enjoy reductions in interest rates on ECLOF’s loan products.

ECLOF is aiming to undertake financial literacy lessons for both existing clients and prospective ones, and organise business clinics for its SME clients in the future.

All ECLOF’s clients are expected to go through its financial literacy lessons and free medical screening to attract relatively lower interest rates on its loan products.

ECLOF Ghana began its operations in 1978.

It is a private Christian Micro Finance Institution and a non-political, non-governmental organisation having a mission of mobilising resources and offering sustainable customer-centered financial services for the total development of its clients and the benefit of all stakeholders.

Source: Business and Financial Times

UniBank targets SMEs

Mr. Ammishaddai Owusu-Amoah, the Chief Executive Officer, uniBank Ghana Limited has said, the bank would continue to focus on small and medium scale enterprises (SMEs), to provide financial support for local companies to grow.

“uniBank would count on its strength, covering good customer service, its understanding of the SME market and investments in electronic banking to mobilize more revenue to reach out to more customers in the market.

“The business approach of supporting the small business segment of the economy is often seen as risky and many financial institutions shy away from them.

“While we focus on the SME sector, the bank will take advantage of the opportunities that exist in the oil and gas industry. We intend to embark on strategic branch expansion, product innovations and aggressive deposit mobilization to grow the balance sheet and increase profitability to enhance shareholder value,” Mr. Owusu-Amoah made this known in Accra at a media conference.

He indicated that the Bank’s approach of aggressive banking anchored on electronic banking has resulted in recording impressive financial results over the years.

Last year, the Bank posted impressive results with 79 per cent rise in total assets from GH¢220 million in 2009 to GH¢307.9 million.

It also recorded 99 per cent rise in loans and advances from GH¢110.8 million in 2009 to GH¢220.6 million in 2010, with a significant jump in profits from GH¢2.5 million to GH¢4.7 million during the period under review.

He revealed that a branch would be located in Techiman in the Brong Ahafo Region, two each in Kumasi and Accra, and one each in Koforidua and Tarkwa.

Last year, uniBank introduced mobile-banking products that had proven very successful, with over 20,000 customers already signed on.

The facility which runs on the global banking software, Temenous Arc Mobile platform enables customers to check their balances, transfer funds from one account to another, execute money transfers and remittances and pay utility bills, all directly on their mobile phones.

In a related development, the bank’s SMEs Department under took a campaign aimed at educating and attracting local business operators to its product range of portfolios.

The programme held at Ashiaman, a suburb of Tema Municipal Assembly was to ensure that the Bank achieve its SME support target for the year as well as improving its market share.

Mr. Samuel Sakyi-Hyde, Head of SME Banking said: “The campaign has been arranged to give relationship managers valuable opportunity to interact with prospective clients within their working environment, thereby taking uniBank’s unique products and services right to their doorsteps.

“This is in line with increasing the SME portfolios of the various branches so as to generate substantial increase in business activities at the branches.

“Since the bank has the SME industry as one of its key banking target, these campaigns would increase the bank’s recognition and exposure to businesses in the sector,” Mr. Sakyi-Hyde remarked.

Source: Business and Financial Times

GIPC Boss urges gov’t to fund local entrepreneurs

The Chief Executive Officer of the Ghana Investment Promotion Center (GIPC), George Aboagye has called on government to make a conscious attempt to fund local entrepreneurs to make their businesses more competitive, at least on the African continent.

He made the call on Multi TV’s current affairs program PM Express Wednesday night. The programme discussed the competitiveness of Ghanaian businesses following a recent Africa Report Magazine publication which ranked top 500 companies on the continent.

The ranking did not have any Ghanaian company in the top 100 performing companies on the continent.

Seven Ghanaian companies, MTN Ghana, Tarkwa Mines, Volta River Authority, Total Petroleum Ghana, Produce Buying Company, Ghana Oil Company and Damang Mines however managed to make it onto the top 500 list. Their positions were 147, 203, 219, 276, 322, 337 and 480 respectively.

But commenting on the ranking, Mr. Aboagye said ‘it does not mean that our businesses are not performing well’.

“What we are looking at is the structure of these companies. Those who are here because they came as Foreign Direct Investment [FDI], are not wholly controlled here. Their level of operation, their level of capitalization and so on is foreign induced, and that is a very critical point. That means their growth will be determined not only by their profitability here but by the decisions that are made outside.”

For him, the no show of Ghanaian companies could also be tied to the fact that not many Ghanaian companies knew of the existence of such a ranking system.

“It means we are not in tune with happenings around us... they [Ghanaian companies] should be aware that such rankings are going on” he said.

He noted that the Africa Report used a criterion which was similar to that used for the Fortune 500 ranking. Their criteria he said was simply based on “turnover, turnover change and net profit.”

This formula, according to him, is quite different from what the GIPC employs in ranking the top 100 companies in Ghana. “We take into consideration size, growth and profitability [of the companies] but we look at growth because we’re interested in growing the economy” he said.

On why none of the companies in the Ghana Club 100 found its way onto the Africa Report’s top 100, Mr. Aboagye responded that “those companies that are in the first 100 have a history of doing business within the rules and regulations and codes of their country without much limitation, sometimes without competition.”

Mr. Aboagye however said the Africa Report ranking should be taken seriously. He added that “when the state owns so many enterprises it stifles out private entrepreneurial spirit which had existed long before ... and when capital is manipulated by the state, then the opportunity or chances for the growth and upward development of entrepreneurship becomes challenged.”


Story by Nii Akrofi Smart-Abbey/Joy News (Multi TV)

Banks urged to design strategies to aid SMEs

Ms Hanna Tetteh, Minister of Trade and Industry, has reiterated the need for financial institutions to design innovative products and services to address financial challenges of Small and Medium Enterprises (SMEs).

She noted that the country could consolidate its present macro-economic stability only when significant resources were channeled into the private sector and the SMEs in particular, to spur the growth of the economy.

It was therefore important for them to have clear policy for SME target groups taking into account their peculiar requirements. Ms Tetteh made the call in an address read for her at the first banking seminar held at the Kwame Nkrumah University of Science and Technology (KNUST) in Kumasi on Tuesday.

The three-day programme, under the theme: 93Facilitating SME Development in Ghana: The Role of Universal Banks", is being organized by the KNUST School of Business and the Ghana Association of Bankers (GAB), to create a platform for universal banks to enlighten micro, small and medium enterprises and academia on their operations. Ms Tetteh spoke the Government's determination to build sound macro-economic environment that would ensure that the private sector was not crowded out.

It would continue to maintain fiscal discipline to stimulate growth, reduce inflation and bring down interest rate. Additionally, they were developing strategies to strengthen the management and operational capabilities of SMEs. Ms Tetteh urged the banks to sign on to the Credit Reference Bureau in order to ascertain the risk profile of their SME clients to enable them lower the cost of capital to the private sector and make borrowing more affordable.

She commended KNUST Business School and GAB for the initiative to bring banks and the business community together to share ideas. Mr Asare Akuffo, President of GAB, called for effective collaboration between academia and industry to speed up national economic development.

Professor William Otoo Ellis, Vice Chancellor of KNUST, who chaired the function, said in line with its resolve to work with industry, KNUST had established a business development centre - housing SME development centre and the business incubator. He said they would continue to assist students to develop entrepreneurial skills.

Source: GNA

SMEs upgrade competence in contract management

Workers of about 100 small and medium enterprises (SMEs) have attended a capacity building workshop in Kumasi to upgrade their competence in contract management as part of stepped-up efforts to assist them to achieve optimal performance. They were drawn from all the five regions in the Northern sector of the country; Ashanti, Brong-Ahafo, Northern, Upper East and West. It was held under the auspices of Eximguaranty Company Ghana Limited, a key player in the financial services market. "Improving the business of SMEs through credit guarantees: The role of Eximguaranty Company (GH) Limited" was the theme. Mrs Felicity Acquah, the Managing Director, said the goal was to expose them to best practices in contract administration, project management and corporate governance to boost growth and anchor the development of the economy.

They were also introduced to the management of information systems. The MD said the company has as one of its products, the provision of advisory support services and training for SMEs and other clients. The idea was to help enhance their technical and managerial competencies to expand their production capacities and become more competitive.

The participants were from various contractor associations and those working with the Ghana Highways Authority, Department of Feeder Roads, Department of Urban Roads and other contract awarding institutions.

Source: GNA

SMEs urged to take advantage of ICT to improve operations

Small and Medium Enterprises (SMEs) have been urged to take advantage of Information Communication Technology (ICT) to improve their operations.

Mr Solomon Allotey, Head of Management of Information System (MIS) of Eximguaranty Company (GH) Limited, said this was the way to go if they were to achieve growth and to increase their market share. He was making a presentation at a day's workshop for managers and directors of SMEs drawn from Ashanti, Brong-Ahafo, Northern, Upper East and West regions in Kumasi.

Mr Allotey spoke on 93Enhancing SME productivity and efficiency through corporate governance and the use of ICT." The workshop, organized by Eximguaranty Company Limited, brought together about 100 participants.

Mr Allotey said there should not be any illusion about the fact the SMEs were important growth pillars and therefore their strong performance would be of tremendous benefit to the national economy. It was on account of this that they needed to be encouraged to fully explore the opportunities offered by ICT to achieve high level of efficiency and become competitive.

Its effective use had proved to be a vital tool for growing businesses across the world and expanding market boundaries. Mr Allotey said the SMEs would, however, require some support from government to translate the benefits of ICT to their core business by way of improved communications infrastructure, access and affordability of ICT equipment.

Source: GNA