In the wake of lingering vulnerabilities from Ghana’s historic financial clean-up, renowned banking expert Dr. Atuahene Richmond Akwasi has proposed a comprehensive, six-point regulatory rescue plan to save the Specialized Deposit-Taking Institution (SDI) sector.
Warning against a potential repeat of the devastating 2017–2019 banking crisis, Dr. Atuahene argues that only a radical restructuring of the regulatory framework and corporate governance can restore public trust and protect depositors’ funds.
Ghana’s SDI sub-sector, comprising microfinance firms, rural and community banks, savings and loans, and finance houses, represents nearly 7 percent of the nation’s total financial sector assets.
However, a toxic mix of passive boards, unchecked insider lending, severe moral decay, and regulatory loopholes has left the sector highly vulnerable.
To avert a looming disaster, Dr. Atuahene’s blueprint outlines six crucial reforms:
1. Split the Regulators: A Dedicated Watchdog for Micro-Banking
Currently, the Bank of Ghana (BoG) struggles to monitor the massive, scattered universe of non-bank financial institutions alongside major commercial banks. Dr. Atuahene recommends separating the regulatory architecture.
By establishing a specialized institution or a dedicated central bank unit solely focused on microfinance, Ghana can ensure prompt, regular, and laser-focused supervision.
2. Reconstruct Bank Boards: Ban “Passive” Directors and Concentration of Power
A primary driver of the sector’s distress is weak board oversight and passive directors who fail to challenge executive management. Dr. Atuahene calls for good governance rules tailored specifically to microfinance functions.
This includes requiring boards to have an adequate number of independent, diverse, and properly trained directors who can actively evaluate bank performance. It also means putting an end to practices like “CEO duality”, where one person acts as both CEO and Board Chair, which dangerously concentrates power and weakens internal controls.
3. Protect Deposits and Hunt Down “Clandestine” Operators
Unscrupulous, unregistered financial institutions have frequently popped up below the radar, mobilizing public deposits and then vanishing or failing to pay matured investments. To protect ordinary citizens, Dr. Atuahene urges the regulator to vigorously enforce the Deposit Protection Act across all SDIs and microfinance institutions.
Simultaneously, authorities must swiftly identify and shut down these illegal, clandestine operators before they can defraud depositors.
4. Stop Mission Drift and Return Focus to the Poor
Originally designed to drive financial inclusion for low-income earners, many SDIs have abandoned their social missions in search of quick profits. This mission drift has seen managers divert depositors’ funds into high-risk, big-ticket transactions and loans for wealthier clients, shutting out the poor.
Dr. Atuahene stresses that the BoG must enforce rules that keep SDIs anchored to their core mandate of providing small microcredits to sustain microenterprises while operating on a sustainable commercial basis.
5. Harness Digital Tools and Build Regulatory Muscle
With SDIs scattered across rural and urban networks nationwide, the central bank cannot monitor them alone. Dr. Atuahene recommends leveraging digital reporting platforms to track real-time liquidity and asset quality.
Under this framework, the BoG should partner with restructured associations, like the Ghana Association of Savings and Loans Companies and Apex Systems, to share the compliance burden. Additionally, the regulatory team must be expanded, better trained, and better paid to match the massive scale of the sector.
6. Extend Compliance Deadlines to Rebuild Fragile Trust
The collapse of nine universal banks and over 400 smaller financial institutions during the 2017–2019 crisis caused massive job losses, frozen funds, and a sharp decline in public confidence.
To prevent a sudden shock that could cause panicking customers to withdraw their funds entirely, Dr. Atuahene advises the BoG and the Sector Ministry to extend final restructuring compliance deadlines, pointing toward December 31, 2027. This transition path will allow short-handed institutions to find practical routes for voluntary consolidation or asset transfers without triggering a fresh panic.
The Bottomline
Dr. Atuahene suggests that the survival of Ghana’s micro-banking sector hinges on moving away from mediocrity and a get-rich-quick culture, replacing it with a robust risk culture, strategic governance, and strict accountability.
“By implementing these measures,” the report concludes, “SDIs in Ghana can enhance institutional resilience, promote financial stability, and contribute meaningfully to economic growth”.
