Let’s Sustain Investor Interest - Bedu-Addo

The Chief Executive Officer of the Standard Chartered Bank, Kweku Bedu Addo, has called on government to consider pushing the limit on Treasury bond issues to beyond the current 5-year fixed note in order to create room for other products to be developed in the economy.

This, he explained, will provide the incentive to develop the country’s mortgage market and keep up investor interest in the economy.

“I think that creating a 5-year note is very good for the market. We should even look at creating 7-year, 10-year or 15-year notes to extend the yield curve.

“On the back of that, you can see a real mortgage market take-off. There’s pricing for long-term money,” he told journalists in Accra on Friday.

Last week, government through the Bank of Ghana auctioned a five-year bond at an interest rate of 14.25 percent, in order to raise GH¢300million for financing four major on-going road projects in Accra and Kumasi.

The last five-year bond that was issued in June 2007 yielded 13.67% while another -- a maiden issue in 2006 that is due to mature in December -- yields 14.47%.

Mr. Bedu Addo is convinced that the latest pricing on the government bond is what the economy needs to sustain its growth and stability. There’s a lot of foreign investor interest in Ghana’s market because of the yield, and a lot of dollars have come into the system because of that interest.

“If our medium-term loan rates start to come down as well -- as much as the short-term loan rates have come down -- the investors will reverse those flows out of Ghana and the currency will move along with it,” he added.

Announcement of the government’s bond auction reportedly pushed dollar inflows and heightened investor interest as foreign investors pitched camp for the sale. As a result, the cedi has been firm in the weeks after the bond sale was announced.

Foreign investors already hold more than one-quarter of outstanding government securities -- up from one-tenth in less than two years.

Slowing consumer inflation and a stable currency have supported a threesome of three-year bonds issued since the year began. In June, year-on-year growth in consumer prices fell to 8.6%, from 8.9% in May and 9% in April.

Inflation had risen to 9.1% in the first quarter of the year following a surge in pump prices, but has been tamed subsequently by falling food inflation which slowed further to 2.8% last month.

With the outlook for inflation stable, especially as the economy enters the harvest season when historically inflation slows, most analysts expect the yield on future bonds to be lower.

The drop in the Central Bank’s benchmark interest rate by 50 basis points to 12.5% last month gave an early indication of money market easing, which should support analysts’ forecasts.

Mr. Bedu Addo is however wary of the drop in interest rates, especially the medium-term rates which he says must stay up a bit even as the short-term rates decline.

He said any move to bring the medium- to long-term rates on par with short-term loan rates will see investor interest in the economy wane.

He explained: “It is a very delicate balance we have to be mindful of. I think what we are seeing is that the short-term rate is coming down, which is around 10 percent for the 91-day Treasury bill. So the short-term is coming down, which is more relevant for us here at the moment in terms of pricing of our assets and everything.

“So, for about much of last year and a bit of this year, we had a very flat yield curve wherein there wasn’t much difference between the short-term and medium-term. Now we are seeing the short-term go down -- it’s gone down to about 10 per cent now -- and if we are seeing the medium-term go up a bit, I think that is about right. That is about how our yield curve should be.

“Over time, it will create opportunities for other products to come into the market; because now if you have a 5-year benchmark, very soon, corporate institutions can issue bonds.

“If we have seven-year and 10-year notes, all those are good developments for the economy so we should look at it that way: but we should also be mindful that the movements there also have an impact on our exchange rate, so it is a very fragile stability that we ought to be mindful of.”

source: Business and Financial Times

Microfinance companies build capacity for new regulated regime

The Ghana Association of Microfinance Companies (GAMC) is building the capacity of members to successfully sail through operational processes under the Bank of Ghana’s new rules and guidelines.

The companies are to operate under the second tier of regulated microfinance institutions, which includes susu companies taking deposits and making profits.

Firms under this category are expected to hold an initial minimum paid-up capital of not less than Gh¢100,000.00 for one unit office.

Northern Sector Vice-President of the GAMC, Nicolas Osei told Luv Biz Report the new regulation is in the interest of both the public and the industry.

“Regulation is not easy but a society that is not regulated does not function, so we don’t have a choice. It’s something that [need] and I think we welcome it. We just have to do everything we can to get ourselves regularized so that we can help the economy grow in the area of poverty alleviation and also job creation and be able to give micro-credit to people to expand their businesses, to pay tuition, to rent houses [etc]”, he stated.

The new licensing requirements are expected to take effect by January 2012.

Mr. Osei noted the new capital requirement should not cause any challenge for businesses in the microfinance sector.

He acknowledged that “GHS 100,000 is a lot of money but it’s not money that you have to go and pay cash down; it’s money you have put into the business and you should be able to prove that you’ve put that money into the business… all BOG wants is for us to be able to stand the shocks”.

Credit Unions also fall under the second tier, but a Legislative Instrument is yet to be passed to regulate activities in the sector.

The Bank of Ghana has increased regulated activities under the Non-bank Financial Institutions Act 2008 from a single tier to four tiers, to include Susu companies, Susu collectors, money lenders and Financial NGOs.



Story by Kofi Adu Domfeh/Luv Fm/Ghana

Capacity building key to bailing out distressed SMEs - Experts

The General Manager in charge of Investments at the Venture Capital Trust Fund, Hamdiya Ismaila has identified the lack of capacity on the part of Small and Medium Scale Enterprise [SME] owners as one of the banes of the SME sector.

Speaking on Multi TV’s current affairs show, PM EXPREESS, the Investment Manager noted that apart from issues of funding that SME operators have to grapple with, the availability of markets and access to modern technology are some of the major problems SMEs have to contend with on a regular basis.

She stressed the importance for SME operators to sharpen their management skills to enable them effectively manage their businesses.

The Executive Director of the Association of Ghana Industries [AGI], Seth Twum-Akwaboah who was also on the show noted that if the challenges SMEs faced were dealt with, it would enable them expand their operations and create jobs for the unemployed in the society.

According to him, over 70 percent of products imported into the country could have been produced right here in Ghana if only the country’s manufacturing sector was adequately resourced.

He blamed the country’s over reliance on imports on the stress and difficulty in accessing funds “especially the manufacturing sector [which] is even worse because most banks provide short term facilities [three months and six months grace period] so to get medium to long term funding to do expansion [and to] buy equipment is very challenging. The level of employment that we expect SMEs to contribute, we are not getting” he explained.

Mr. Twum-Akwaboah was also quick to add that the SMEs are not able to match the cost of imports because of their lack of technology which would have meant operating at a very efficient level to lower the cost of production thereby ensuring a competitive advantage.

According to Hamdiya Ismaila, the Venture Capital Trust Fund has so far lent support to some 42 SME businesses. “We’ve done a couple of them and trust me they are not very far away from us. We’ve done a toner company that actually manufactures toners in Ghana. We do start ups, we do early stage and we do growth. In fact 66 percent of our portfolio companies are start ups, and we’ve done a couple of distressed companies”.

But the AGI Executive Director was unimpressed with the number of companies that have so far benefited from the Venture Capital Trust Fund. According to him, “it comes back to the question of impact. If Venture Capital all this while could only support 42 companies then it means that the overall impact will not be that much.”

He however sympathized with the intervention outlet explaining that if they are not adequately resourced and also big enough to cover a large number of enterprises, then it becomes pointless to set them up in the first place.

He added that consequently it would be unfair to expect one particular institution to make so much impact or solve all the SME problems.

“Indeed part of the reason why the enterprises are struggling is that their problems are many; when you solve one, the other one is also there waiting. So if it is financing issue, you solve the financing issue, but then there is a problem with equipment, there is a problem with management, there is problem with the business environment in general” he added.

The Venture Capital Trust Fund which was set up by an act of Parliament, Act 680 was set up to assist businesses by way of equity investments or long term investment.

Hamdiya Ismaila insisted that the fund does not lend money to businesses but rather goes into partnership with them in order to help them set up, or to restructure, help with recruitment, and also build capacities with the foresight to exit after six years.

“We just don’t bring in money; we bring in expertise and build capacities because the idea is not for us to leave the company as distressed as it was”, she pointed out. She lamented that they could do more but for the unwillingness on the part of most enterprises to share ownership.



Story by Adwoa Dansowaa Awuku/ Multi TV

Money lenders approve new operating regulations

Money lenders have welcomed the revised operating rules and guidelines for microfinance institutions, describing it as adequately addressing their concerns.

After several stakeholder deliberations, microfinance institutions have been categorized into 4; a breakdown from the earlier broad categories of 2.

Tier 1 of the review comprises rural and community banks, finance houses and savings and loans companies which would continue to be regulated under the Banking Act, 2004 (Act 673).

Susu companies, credit unions and other deposit taking and profit making financial NGOs are placed under Tier 2 and expected to have minimum capital of Gh¢100,000.

Money lenders and non-deposit taking financial NGOs are under Tier 3 but are now expected to have capital base of Gh¢60,000 instead of the initially-proposed GH¢100,000.

Individual Susu Collectors and money lenders have also now been classified under Tier 4 with no minimum capital requirement.

Even though the microfinance institution with capital requirement still have up to the end of the year to meet it, Public Relations Officer of the Money Lenders Association of Ghana (M-LAG), Lawrence Agyei told Citi Business News the review satisfactorily addresses their earlier concerns.

“They included money lenders with no capital requirement and that is some source of good news to those who have been in the business for a long time.

"We are generally happy with the Bank of Ghana. At a negotiation table you always do not expect 100% win in your favor and so far their reasoning has been acceptable to us”.

Lawrence Agyei is also certain that the review will guide the public in making informed microfinance decisions.

Source: Ghanaweb.com

Ghana's Stable Economic Environment is sure bet for investment -Andani

Mr Alhassan Andani, the Managing Director of Stanbic Bank, has said Ghana's growing democracy, peaceful environment, and the recent discovery of oil, make her a secure place and a viable destination for investment.

Speaking during an interactive session organized by Stanbic Bank for its private banking customers, Mr Andani said the country had over the years demonstrated the ability to govern, manage resources and build strong institutions that helped to create conducive environment for investors. "Since Independence, we have demonstrated our ability to govern ourselves, manage our resources, establish strong and robust institutions to create conducive environment where high net worth investors in and outside the country can find a worthwhile investment destination," he said. The talk on the theme, 93Our Health, Our Wealth, Our Nation-exploring the wellness triad", also marked the official launch of the Bank's Private Banking Offering, which had been operational for almost two years. The Managing Director said so far, 2011 had proven to be very successful and stable for Ghana's economy.

"With inflation from 9.35% in December to 8.9% as at May, the cedi 's resilience toward the US dollar with depreciation of only 4%, plus the declined of the central banks prime rate from 13.5% in December to 12.5% in June, we are truly on course to achieve a target Real GDP Growth of 12.3% ", he affirmed. Mr. Andani said over all the improved economic environment had led to a boost in investor confidence and improvement in the country's economic activities.

"This boost has trickled down to the financial outputs of our businesses. For instance, the current customer-loan portfolio of the banks in Ghana has improved disposable incomes, giving individuals and SMEs capital for self care and financial development, creating healthy minds and a wealthy nation," he added.

Mr. Adu Anane Antwi, the Director General of the Securities and Exchange Commission, stressed the commitment of regulators in the financial industry to ensuring that measures were in place to guarantee higher investor security, to make the country a good investment landscape that offer more value on investments.

Mr. Yoofi Grant of Data Bank Limited, advised Ghanaians to seek adequate information to guide them in making the best investment decisions. "If you don't secure your investment by seeking expert advice, you could even lose what you have already", he said.

Professor Badu Akosah, former Director General of the Ghana Medical Association, said regular exercise, balanced diet and adequate sleep were the surest ways to maintaining a healthy life".

He observed that in Ghana, one out of three adults was hypertensive, and one out of eight up to ten was diabetic.

Therefore, a balance of the three is very essential in maintaining good health", he emphasized.

Source:GNA

Banks, financial institutions to charge VAT for advisory services

Banks and financial institutions may soon be charging Value Added Tax (VAT) for some of advisory services they are offering.

The bill that will actualize this is currently before parliament.

The tax will however not be applied to deposits, ATM charges and the main traditional services bank render to their customers.

Joy Business has learnt that government is hoping to start implementing the tax before the end on the year.

Source: myjoyonline.com

Bank of Ghana out with new licensing regime to regulate microfinance industry

The Bank of Ghana has issued new operating rules and guidelines to regulate microfinance institutions in the country, in pursuance of the provisions of the Non-bank Financial Institutions Act.

Categorization of regulated activities under the Non-bank Financial Institutions Act 2008 has increased from a single tier to four tiers, to include susu companies, susu collectors, money lenders and financial NGOs.

Under the second tier, susu companies taking deposits and making profits shall hold an initial minimum paid-up capital of not less than Gh¢100,000.00 for one unit office; and the opening of branch(es) shall be subject to higher capital requirements.

Credit unions fall under the second tier, but the Bank of Ghana is yet to pass a Legislative Instrument to regulate activities in the sector.

The third tier of money lenders and non-deposit taking financial NGOs shall maintain a minimum paid-up capital of Gh¢60,000.00, in addition to a gearing ratio not exceeding eight times their capital.

Activities under the fourth tier include the operations of individual susu collectors, susu enterprises, individual money lenders and money lending enterprises.

Operators under this tier shall belong to an umbrella body like the Ghana Cooperative Susu Collectors Association (GCSCA) and there shall be no minimum capital requirement for an individual susu collector or money lender. However, each registered member of an umbrella Association shall contribute to an Insurance Fund to be set up by the Association.

Meanwhile, regulation under the first tier, including rural and community banks, savings and loans companies and other financial intermediaries already regulated under the Banking Act, remains unchanged.

The new licensing requirements are expected to take effect within the next six months.

Companies operating the susu business are already confident of better prospects in the micro-finance industry, with the new Central Bank regulation.

Players in the sector have maintained the traditional micro-finance industry is the answer to efforts at mobilizing funds from the unbanked population.

Chairman of Susu companies in the Ashanti region, Nicolas Osei, tells Luv Biz Report the on-going restructuring is leading microfinance into a new direction.

He believes the new interventions should create more jobs and instill public confidence in susu schemes.


Source: myjoyonline.com