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4000 employees of collapsed microfinance firms lose jobs receiver offered

Employees of the microfinance firms that went into receivership have been cut drastically, The Receiver Eric Nipah, has disclosed.

Mr Nipah, a Director of PricewaterhouseCoopers Ghana Limited, revealed that he re-engaged about 6,000 of the employees but had to maintain less than 50% of the workers.

A total of 347 microfinance companies and 23 savings & loans and finance house companies had their licenses revoked on May 31 and August 16, in 2019.

The Bank of Ghana (BoG) placed Mr Nipah in custodial responsibility for the properties of the firms, including tangible and intangible assets, rights and claims as well as all liabilities.

Thousands of employees lost their jobs, but Mr Nipah said he engaged those who were willing to work for him.

“I employed close to 6,000 of them. When I was appointed, I had in excess of 1000 branches throughout the country,” he said in an interview on Citi FM which was monitored by theghanareport.com on Tuesday.

Mr Nipah terminated the contracts of the staff that they had with the collapsed firms and offered them new contracts “from a situation of full employment to consultancy” to work for the receiver.

“I ran a payroll of about a GHC 14million as the time, on a monthly basis, and certainly it was not unsustainable”.

He, therefore, scaled down to “2000 staff capacity”.

Salary arrears, exit packages to be paid by July

The Receiver said he had engaged former employees through their representatives in negotiations to pay outstanding salaries after the revocation of the licences.

“By the end of this month, we will start paying employee-related claims,” he stated. “The money should start hitting their accounts before the end of July.”

“We are on course for payment” of exit packages and all employee-related benefits, he added.

The move is aimed at easing the economic impact of the licence revocation on former employees of the affected companies in the wake of the COVID-19 pandemic.

Auction of properties belonging to collapsed firms.

Meanwhile, the Receiver of some collapsed financial firms has requested bids from the public to sell properties of the collapsed firms to raise money.

Mr Nipah has advertised over 50 used cars, landed property and chattels from the Greater Accra, Ashanti Region and Western Region for auction.

Different brands and models of cars, including Ford Explorer and Everest, Toyota, KIA Picanto and Sportage, Hyundai Accent and Grande, Honda Civic, Mazda, Nissan Hardbody and Frontier, TATA, Isuzu, Citroen and Mitsubishi, are on display.

Background

The apex bank took action to withdraw the licences pursuant to section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), which requires the BoG to revoke the licences of a bank or Specialised Deposit-taking Institution (SDI), when it determines that the institution is insolvent or is likely to become insolvent within the next 60 days.

The BOG cited insolvency and dormancy for the move to sanitise and stabilise the financial sector after it had taken similar action against banks.

The BoG said in a statement that majority of licensed microfinance companies began to show signs of distress from 2014 onwards, as a result of severe undercapitalisation, high cost of operations largely from high and unsustainable interest rates offered to depositors, poor lending and investment practices.

This led to inordinate losses, diversion of customer deposits into private, unprofitable and speculative ventures, general non-compliance with prudential norms, poor corporate governance, weak internal controls, and fraud, among others.

“Consequently, the financial position of these institutions continued to deteriorate, leading to their insolvency with the majority of them ceasing operations and closing their offices with depositors’ funds locked up.

“Even those that have not closed their offices are unable to pay their depositors. This has placed a substantial amount of depositors’ funds at risk,” the release pointed out.

 

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