The Ministry of Finance has begun disbursing GH¢700 million as the initial portion of a GH¢1.5 billion bailout for investors affected by the collapse of Asset Management Companies (AMCs), a measure announced in the 2024 mid-year budget review.
Finance Minister Dr. Mohammed Amin Adam stated during the August 2024 Monthly Press Briefing on the Economy that this action represents a vital step in the government’s efforts to rebuild trust in the financial sector.
The funds, which are part of a broader relief package approved by the Cabinet, are intended to assist thousands of investors whose assets have been tied up in failed fund management firms since the financial sector overhaul began in 2017.
This initiative is particularly significant as the government faces increasing pressure to address the ongoing impacts of 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 noted that prioritizing pensioners highlights the financial sector cleanup’s social impact on this vulnerable group.
The Finance Minister explained that the GH¢1.5 billion package will be disbursed in three phases, with the initial GH¢700 million already prepared for release by the Controller and Accountant-General.
This first disbursement is expected to substantially increase the number of investors fully compensated under the bailout plan.
The Securities and Exchange Commission (SEC) will manage the distribution of funds, focusing particularly on Blackshield Fund Management Ltd., one of the largest affected asset management companies.
The bailout is anticipated to fully resolve claims for 82,096 Blackshield investors, or 92% of its claimants, and 12,069 investors from other fund management firms, representing 78% of their claimants.
Overall, the government expects this intervention to fully settle 94,165 investors, covering 90% of the 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 received with cautious optimism within financial circles. Market observers are eager to assess how swiftly the funds will be distributed to affected investors and the potential effects on overall market confidence.
Analysts note that, amidst ongoing economic challenges such as high inflation and the IMF programme, the government’s capacity to meet its financial obligations will be under close scrutiny.
They also mentioned that effectively executing this bailout could be pivotal in rebuilding trust in the financial system and in drawing both domestic and international 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?
Korsi Dzokoto, an analyst, questioned, “What are the timelines for the government to complete these processes?”
He also highlighted discrepancies in the government’s communication about the bailout program, noting: “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.