Many Specialized-Deposit-Taking Institutions (SDIs) are facing what can be described as a “marry or die” situation amid the new minimum capital requirement demand by the regulator, the Bank of Ghana (BoG).
Due to the new rules, microfinance firms are required to hit GH¢100 million, and existing ones need to top up to GH¢50 million. Amid the increase in the capital requirement with the aim of strengthening the SDIs sector, the BoG is strongly encouraging smaller players to merge.
But despite the encouragement for struggling SDIs to merge, which might sound better on the surface, a banking and finance expert is revealing that the reality on the ground could be a nightmare of job losses, cultural warfare, and service breakdowns.
A “Forced Marriage” of Unequals
According to a research paper by banking and financial consultant Dr. Richmond Atuahene, in a healthy market, companies merge because they want to. Under these new rules, the mergers are regulatory-driven rather than market-driven.
This often forces a healthy, well-run SDI to adopt a weak or technically insolvent partner just to meet a capital deadline.
Instead of creating a financial powerhouse, he fears that this can create a “toxic” entity. The systemic weaknesses of the failing institution, like bad loans and poor governance, can quickly drag down the healthy one, risking the savings of even more depositors.
The Possible Impact: The Human Toll
The most immediate “doom” predicted for the sector is a massive wave of job losses. According to Dr. Atuahene, when two institutions become one, redundancy becomes the buzzword.
He mentions some human cost this regulatory-induced mergers and acquisitions can generate;
• Layoffs and Anxiety: The banking expert reveals that evidence from the 2017–2020 crisis shows that mergers lead to significant layoffs, leaving thousands of professionals unemployed and creating a climate of low morale and uncertainty for those who remain.
• Brain Drain: The chaos of a forced merger often causes the most talented staff to jump ship, leaving the new institution without the expertise it needs to survive.
The Cultural and Operational Impact
Dr. Atuahene further acknowledges that this kind of forced merger isn’t just about the money; it’s about the people and the systems. Every SDI has its own way of doing things. Should this new capital requirement result in mergers, Dr. Atuahene foresees a list of cultural and operational impact.
• Cultural Clashes: Merging two different corporate “personalities” often leads to internal friction and inefficient decision-making. What worked for a small, community-focused rural bank might not sit well with a high-growth microfinance firm.
• The IT Nightmare: Combining different IT systems is notoriously difficult. The sources warn that these struggles often result in IT failures and service disruptions, leaving customers unable to access their money when they need it most.
The Impact on the Customer
For the average Ghanaian, the market trader, the small-scale farmer, or the startup owner, these “mega-SDIs” might be bad news.
The expert, from experience, foresees a loss of identity: Small SDIs are loved for their personalized service. A large, consolidated firm often loses that “local touch,” leading to long queues and poor customer service.
Moreover, there is the fear of “Neglecting the Little Guy”. There is a serious risk that these new “mega-SDIs” will stop caring about small loans for poverty reduction. Instead, they may shift their focus toward large corporate lending, leaving SMEs in the lurch.
Dr. Atuahene further maintains that with fewer institutions competing for business, customers may face higher fees and increased borrowing costs.
The Bottomline
The expert argues that mergers should be the last resort, not the primary goal. Instead of forcing banks together, the sources suggest that the BoG should extend the deadlines to December 2027 to give firms more time to grow organically.
He further calls for a moderate capital increment instead of the one announced by the Bank of Ghana. (e.g., GH¢30 million instead of GH¢50 million) to reflect the current economic reality.
Dr. Atuahene also calls for the cleaning up of the “bad apples” through independent probes before forcing them onto healthy firms.
While the BoG wants to build resilience, doing so through forced mergers could unintentionally destroy the very institutions that the most vulnerable Ghanaians rely on.
