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SADA Is the Wrong Institution to Establish a Bank – Development Economist

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A Development Economist and Lecturer at the University for Development Studies Dr. Michael Ayamga-Adongo has kicked against a decision by the Savanna Accelerated Development Authority to establish a bank.

SADA had earlier disclosed its plans to establish a bank with a startup capital of $100 million in the savanna zone and has already received clearance from the ministry of finance to go ahead with the initiative.

CEO of the Authority Mr. Charles Abugri has said that the bank will constitute 20 percent government, and 80 percent private equity with funding partners expected to come from the World Bank, African Development Bank, ECOWAS Bank for Investment and Development, the International Fund for Agriculture and Development among others.

But in a Facebook post, Dr. Michael Ayamga questioned the ability of SADA to run and manage the bank considering its antecedents that has sparked some despondency amongst Ghanaians. In the opinion of the lecturer, SADA should instead lend its expertise in running a financial institution to already existing banks such as the Agricultural Development Bank and the National Investment bank which have also failed to cure a huge credit gap.

“I agree totally with SADA II that weak financial inter-mediation significantly undercuts the potential of smallholders and hinder their ability to engage meaningfully along increasingly complicated commodity chains. The gang of two evils, risk and uncertainty has meant that formal financial institutions have been unable to fill this huge credit gap. That said and done, I am skeptical that a SADA bank would succeed where the Agricultural Development and National Investment Banks failed. The ADB struggles and its progress stifled by huge non-performing agricultural loans. In my view, if SADA II has found a way of going around the issues of non-performing loans and huge defaults by agricultural borrowers, it would be ideal to share this information with the ADB and NIB,” he wrote.

He intimated that “If these banks are able to fix these issues we will not be needing another bank.”

According to him, the image of SADA has made it less credible and incapable of running such a financial institution adding that “The image SADA has projected in its short history makes it impossible for it to run a financial institution in a sustainable manner. SADA is in the process of writing off millions it provided as loans to farmers due largely to poor harvests.” He further questioned the rationale behind the Authority’s decision to write off the debts owed by farmers as a result of their failure to pay back due to poor harvest. This problem he noted has not been resolved.

“The writing off of loans reinforces the believe that money from government institutions and agencies be they banks or ministries are rewards for loyal supporters of government and the obvious way to reap these rewards is to borrow and default,” he opined.

By: Azongo Albert | A1RADIOONLINE.com | GHANA


 

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