Parliament approves US$30 million loan facility to finance FSDP

The Chairman for the Parliamentary Select Committee on Finance and Member of Parliament for New Juaben South, Dr. Mark Assibey-Yeboah, informed the House that the Financial Sector Development Project aims at supporting the government’s vision of making a broad range of affordable, high quality and formal financial, services and products available to Ghanaians.

Presenting the Finance Committee’s report in Parliament, Dr. Assibey-Yeboah stated that one of the objective of the loan facility is to ensure sound, responsible and innovative services by the financial institution (IDA).

Dr. Assibey-Yeboah pointed out the Committee’s view that the loan facility is necessary to support the government’s efforts, to improve the financial sector regulatory framework.

The Deputy Majority Leader and Member of Parliament for Dome/Kwabenya, Ms. Sarah Adwoa Safo, moved for the resolution of the motion and was seconded by Dr. Assibey-Yeboah.

The Resolution was passed and approval was granted by the House pursuant to Article 181 of the 1992 Constitution, Order 148 of the Standing Orders and Sections 55 and 56 of the Public Financial Management Act, 2016 (Act 921).

The loan facility by the International Development Association has 5 years of grace period  and 25 years of repayment period. The loan also has 25 years of repayment period and a maximum commitment charge of 0.5 percent per annum, while the first eighteen months are waived.

Service charge for the loan facility is 0.75 percent per annum while interest rate covers 1.25 percent per annum.

On the concessionality rate of the loan, 33.23 percent is covered.

The project consists of four main components:

The first component focuses on improving the Financial Sector Regulatory Oversight (FSRO), Market Transparency and Discipline (MTD) with an amount of US$8 million.

This will support Bank of Ghana (BoG) and Ministry of Finance to improve the oversight of the Specialised Deposit Institutions (SDIs), the market and its transparency as well as discipline.

The first component contains sub-components of capacity enhancement of the Regulatory and Supervisory framework for the SDIs, capacity building of the Ghana Co-Operative credit Unions Association (CUA) to supervise Credit Unions and establishment of support of a Domestic Credit Rating Agency and the Design of a Financial Data Centre.

The second component aims at increasing the Outreach of Rural Community Banks (RCBs) and Micro Finance Institutions (MFIs) and linking Village Savings and Loans Associations (VSLAs) to the Formal Financial Sector.

This also has three sub-components of upgrading ARB Apex’s Systems and ICT platforms to support the Introduction of Digital Financial Services, and accommodate Banking Agent Services, upgrading Management Information System (MIS) of Microfinance Institutions (MFI) and linking Village Savings and Loans Associations to formal Financial Services Providers.

The third component aims at bolstering Financial Capability and Consumer Protection.

The fourth component further focuses on enhancing the capacity for the Implementation and Monitoring of Financial Sector Policies, and Supporting Project Implementation.

This will again support the Capacity Building of the Ministry of Finance’s Financial Sector Division, project implementation at the Finance Ministry and unallocated funds to cover possible unfavourable budget variances that may arise during the implementation of the project.

When the project is completed, it is expected to enhance supervision and co-ordination among all financial sector regulators as well as enhancing the Special Deposit-Taking Institutions and Credit Union regulatory, and supervisory framework and resolution capacity.

The project will again, improve the quality of Credit Unions financial information and reduction of the time required to complete on-site examination.

Adding further, the project is expected to increase the number of Village Savings and Loans Associations and their access to formal financial services. Handling of financial consumers’ complaints by regulators will also be expedited.