Surviving the financial storm
ON December 4, 2022, the government, through the Ministry of Finance, released a statement on the Domestic Debt Exchange Programme (DDEP).
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First of all, the DDEP is a long, temporary halt of payments of the needed coupon rates on investors’ cash holdings with the government through the financial institutions.
The reason for that is to grant the government space to hold enough cash or to enable it to meet some statutory targets to service the interest payments on external borrowings.
It is also a precondition to meeting a target to fully qualify for the IMF deal.
At the receiving end of this are the businesses of individuals whose revenue comes from these forms of investments.
Most financial institutions will find it difficult to pay dividends for shareholders within the space of the temporary holdup.
Profit levels of these financial institutions will reduce drastically if their managers are not proactive.
For banks and other financial houses to be sustainable, there should be a reasonable and marginal increase in the rate of lending in order to ensure sustained payments of their recurrent expenditures and remain in business.
They will also need to marginally increase their rate of borrowing from clients to attract creditors to deposit their money in medium to long-term instruments such as fixed deposits, treasury bills and shares.
Faced with dwindling purchasing power because of the raise in the cost of everything, including education, and education materials at all levels, parents are finding it difficult to fund their children’s education.
For financial institutions, prudent and proactive management is required and they should as well move their research departments into action in engaging customers and developing new product lines.
Furthermore, financial institutions must be flexible to support micro businesses and also startups with feasible business proposals.
Most financial houses do not want to invest in start-up businesses due to the fear of collapse.
This phenomenon is due to lack of competence on the part of credit departments to do a review of such proposals and advise these visionaries and also monitor them closely to sustain them.
Supporting startup businesses is the way to creating entrepreneurs in the country and making sure unemployment is dealt with.
I urge banks, microfinance institutions and other financial institutions to consider adopting and implementing some of these suggestions.
Rev. George Obese Addo,
Asawasi St Theresa’s Cooperative Credit Union Ltd,
Kumasi.
Email: [email protected]