Dream Finance Messed Up Depositors’ Funds

THE
BANK of Ghana (BoG) has stated specific issues that led to the revocation of
the licence of Dream Finance Limited (DFL).

The banking sector regulator said DFL used
depositors’ funds to finance related party projects which over exposed it to
six of its related companies paving way for the non-performing related party
exposures to contribute significantly to its liquidity challenges.

Dream Finance’s net worth of negative GH¢333.46 million
as of end May 2019 indicates that its paid-up capital is impaired in violation
of Section 28(1) Act 930.

The institution’s capital adequacy ratio of
negative 7,508.10% as of end May 2019 is in violation of Section 29(2) of Act
930.

Dream Finance persistently breached the cash
reserve ratio requirement since 2015 due to serious liquidity challenges. It was
unable to honour customers’ withdrawal requests, while it changed its name from
Dream Finance Limited to El Finance Limited and relocated its head office without
the prior approval of BoG.

“Based
on a 2015 review of the institutions operations, Bank of Ghana found Dream
Finance to be insolvent and also facing liquidity challenges mainly as a result
of the institution’s non-performing exposures to its related companies. The
Bank of Ghana subsequently engaged the directors of the institution and agreed
on a timeline to resolve the solvency and liquidity challenges. The institution
failed to comply with the agreed plan. The institution’s capital adequacy ratio
and net worth are both negative as of end-May 2019,” the BoG report noted.

Furthermore, there were weaknesses in its corporate
governance practices as it was without a functioning board and key management
personnel with the relevant qualifications and experience to do the business of
banking, it was involved in creative accounting practices, thereby
misrepresenting and misreporting its true financial position to the regulator,
while also it failed to implement BoG’s on-site examination recommendations.
The institution is currently not engaged in normal business activities as a
result of its capital and liquidity challenges.

DFL was licensed by the BoG on October 25, 2013 as a finance company.

BY Samuel Boadi

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