Mr. Pierre Laporte, World Bank Country Director for Ghana, Liberia and Sierra Leone
Ghana’s 2017 financial sector clean-up was necessary, but the government should have transitioned affected staff to other sectors to curb job losses, Mr Pierre Laporte, World Bank Country Director for Ghana, Liberia, and Sierra Leone, has said.
In 2017, the New Patriotic Party (NPP) government decided to save the financial sector from collapse in what became known as the “financial sector clean up”.
In the exercise, the government collapsed about nine different banks, 23 other Savings and Loans companies, 386 different Microfinance companies, and 53 fund management institutions in the country.
This was after the Bank of Ghana had conducted an asset quality review in 2015 and 2016 and came out with a report that there were severe challenges with solvency, liquidity, and asset quality in Ghana’s banking industry, with some banks showing significant under-provisioning and capital shortfalls.
Many youths working in these financial institutions lost their jobs, adding to the hike in youth unemployment in the country.
Sharing his opinion on the subject of whether the government should have saved the collapsed institutions to protect jobs or not, Mr Laporte speaking on the Class Morning Show on Monday, 16 August 2021, noted that the clean-up was important.
He told show host Kofi Oppong Asamoah that “It was important that this clean up happened maybe the details could have been done differently, I won’t get into that but under the direction and what happened, it was important because you cannot have a financial sector that is plagued by non-performing banks, non-performing loans, institutions that have poor governance, institutions that cannot honour people’s desire to have their funds back.”
“You cannot have a system that is basically short of capital adequacy; you cannot work like that, so the clean-up was necessary,” he added.
In his opinion, however, the government should have made adequate arrangements to transfer staff of these collapsed banks into other sectors to have prevented the case of unemployment that accompanied the financial sector clean-up.
Mr Laporte noted, “Yes, people lost jobs, and the question there is what did the government do to prepare for the transition of those people into other things? Unfortunately, I cannot respond to that, but I believe if it didn’t happen [when] the government could have done better because that is what generally happens with public service redundancy or [with] big kind of public service cuts, what you do, the good way of doing it, is to prepare other places to absorb those people but [the clean-up], it was necessary….”