By John Osei
As far back as last year, some experts had predicted the fall of several banks in Ghana and the recent takeover by GCB could herald a major restructuring of Ghana’s banking sector. But since the main function of banks and other financial institutions is to hold deposits and grant credit to the public, the fall of a single financial institution is a loud call to action to protect depositors.
In the light of the above and past scandals involving microfinance companies such as DKM and God is Love, as well as ASN Financial Services, I looked at how cooperative credit unions promote financial inclusion and serve as a substitute to banks. Along the chain of financial service providers, it’s hard to find any example of a credit union in Ghana that has gone down with depositors’ funds.
Credit unions play a vital role in the nation’s efforts to deepen financial inclusion and above all provide a haven for individuals and groups to access credit at low interest rates compared with traditional banks and other finance houses. According to the African Center for Economic Transformation (ACET), accessing credit remains a major constraint to growth in Africa, though in a few African countries like Zambia, about 95% of SMEs have bank accounts.
Smallholders face all the systemic credit market biases against SMEs and more because amongst other things they are unable to offer their land as collateral when it’s acquired under any communal land tenure system. However, according to Mr. Daniel Adamba, a smallholder pineapple farmer and a member of a credit union, he was not required to offer land as collateral before being granted an agricultural loan of GH¢ 1,000 at a reasonably low interest rate to expand his pineapple farm.
“Members need more education on savings, business management and basic bookkeeping to promote the growth and maintain sanity in credit unions,” Mr Cyprian Ackeey, an auditor with the Ghana Cooperative Credit Unions Association (CUA) explained. He stressed further that credit unions cater for the needs of smallholders better than traditional banks because unions rally around a common bond in providing tailored financial services and products.
For his part, Paapa Kwakye, the Eastern Regional manager of CUA, said that Credit Unions can fill the credit gap in the economy and serve the need of smallholders better if managers and members will consider consolidating their base. Cooperatives are the surest way to go if we want to deepen financial inclusion to serve the needs of our people.
John Osei is Communications Officer at ACET.