Help Ghana grow rather than maximizing your profits – Adu Boahen to banks

A Deputy Minister of Finance under Akufo-Addo’s first term has admonished banks to tone down on profit obsession and support the economy.

The admonition from Charles Adu Boahen comes in the wake of the Banks’ opposition to a five percent financial sector clean-up tax on gross profits.

The former deputy minister said he expected financial institutions to be upfront with solutions that would help the government manage the economy.

The government said it spent GHC 21billion in cleaning up the financial sector and needed to raise revenue to support the economy hence the tax.

“We need to take another look at how the banks operate and their ability to help support this growth rather than just their focus on maximizing profits,” he explained.

Mr Adu Boahen was providing some insight on the 2021 Budget Statement and Economic Policy presented to parliament by Caretaker-Finance Minister Osei Kyei-Mensa-Bonsu.

The tax is subject to review in 2024 and applicable to commercial banks, except rural banks and the yet-to-be-established National Development Bank.

What were his concerns?

He acknowledged “the pain” of entrepreneurs who have built banks “on the back of their sweat” but have to cede some of their returns in the form of taxes.

At the same time, he was of the view that banks have been profitable with one of the reasons being the execution of government transactions.

He highlighted the issuance of government securities which “provides them with healthy returns with the least amount of risks”.

Once again, he reiterated the need for government’s intervention due to malpractices of some rogue financial institutions which threatened the sector.

He was of the view that the government needs to borrow to save the situation to prevent the loss of over 4.6 million depositors’ funds in addition to thousands of jobs.

“I think it is only fair that the banks who were the biggest beneficiaries of the intervention aside from the depositors, come to the table,” he added.

According to him, the 5% levy generates only a fraction of what has been spent on the bailout.

In his opinion, banks should have been proactive to propose proactive to support and not waited for the government to impose the tax.

He said banks should also issue more loans to help the private sector to develop.

What was the reaction by bankers?

Following the announcement of the taxes, the Ghana Association of Bankers (GAB) has appealed to the government to reverse the tax.

The Chief Executive for GAB, Mr John Awuah, said the timing was wrong and serve as a disincentive for investors.

Ultimately, he noted that it would affect loans to business to recover from the adverse impact of COVID-19.

Beyond that, it would affect the private sector in producing to be competitive in the wake of the African Continental Free Trade Area (AfCFTA) agreement.