The Ministry of Finance has initiated a release of GH¢700million as the first tranche of a GH¢1.5billion bailout package for investors affected by the collapse of asset management companies (AMCs), which was announced during the 2024 mid-year budget review.
This development, Finance Minister Dr. Mohammed Amin Adam said – during the August 2024 Monthly Press Briefing on the Economy, marks a crucial step for government’s efforts to restore confidence in the financial sector.
The funds, part of a larger relief package approved by the Cabinet, are aimed at providing relief to thousands of investors whose funds have been locked up in defunct fund management companies since the financial sector clean-up began in 2017.
This move comes at a critical time, as government faces mounting pressure to resolve lingering effects of the financial sector reforms.
“This intervention is being done despite the tight fiscal space, evidence of government’s commitment to provide relief for investors in the defunct AMCs – especially the pensioners,” Dr. Adam stated during the briefing.
He added that the emphasis on pensioners is an acknowledgement of the financial sector clean-up’s social impact on a vulnerable segment of the economy.
According to the Finance Minister, the GH¢1.5billion package will be released in three tranches – with the first GH¢700million already processed for release through the Controller and Accountant-General.
This initial disbursement is expected to significantly increase the number of fully settled investors under the bailout scheme.
The Securities and Exchange Commission (SEC) will oversee distribution of funds with a particular focus on Blackshield Fund Management Ltd. – one of the largest affected AMCs.
The bailout is projected to fully settle 82,096 Blackshield investors, representing 92 percent of its claimants, and 12,069 investors from other fund management companies, accounting for 78 percent of their claimants.
In total, government expects this latest intervention to bring the number of fully settled investors to 94,165 – representing 90 percent of the total 105,178 validated claims.
An analyst with a fund management firm, who wished to remain anonymous due to his position in the market, said: “While this bailout is a positive step, it’s important to note that it comes nearly seven years after the initial financial sector reforms. The delay has caused considerable hardship for many investors, particularly retirees who relied on these funds for their daily sustenance”.
The announcement has been met with cautious optimism in financial circles. Market watchers are keen to see how quickly the funds will reach affected investors and what impact this will have on overall market confidence.
Analysts say as the country continues to navigate its economic challenges, including high inflation and the ongoing IMF programme, government’s ability to fulfil its financial commitments will be closely scrutinised.
They added that successfully implementing this bailout could play a crucial role in restoring trust in the financial system and attracting both domestic and foreign investments.
“As of date, several bank depositors (savings and loans, microfinance and discount houses) whose claims were certified by the receiver in 2019 and 2020 have yet to be reimbursed. Are they among the GH¢700million…if not, when?
“What has changed since Blackshield customers were first excluded from payments made to fund management companies? And are those fund management customers who received only 25% of their locked-up funds going to receive the rest of their monies?
In all these, what are the timelines for government to bring these processes to an end?” quizzed Korsi Dzokoto, an analyst.
Mr. Dzokoto also pointed out inconsistencies in government’s communication regarding the bailout programme, saying: “How much does government’s clean-up of the banking system cost? We have heard amounts ranging from GH¢21billion to GH¢25billion.
“In the main budget, government announced GH¢4billion to pay-off locked funds in the banking and fund management sectors, including GH¢2.3billion for NIB recapitalisation. In its mid-year budget, government mentioned GH¢1.5billion.”
The MoF has however maintained that the bailout package’s remaining tranches will be released in due course, with the timeline to be communicated in subsequent briefings.