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Momodou
Denmark
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 Posted - 14 Sep 2007 : 19:14:20
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THE GAMBIA'S FINANCIAL SECTOR IS UNDER DEVELOPED SAYS 1ST GOVERNOR CBG
By Annia Gaye
The 1st Deputy Governor of the Central Bank of The Gambia, Mr. Basiru Njai, has said that The Gambia Financial Sector is under developed and the range of institution is narrow. Mr. Njai was speaking at the opening of a one-day sensitization workshop organised by the Central Bank on the issue of the new institutional and Regulator Framework for the micro finance sector held at the Paradise Suites Hotel on Tuesday 11 September. He observed that most people do not have access to basic payment services or savings accounts and that the largest part of the productive sector cannot obtain credit. He said that, infact the private sector credit to Gross Domestic Product (GDP) is low even by the standards of sub-Saharan Africa. Mr. Njai said, "Implementation monetary policy in the context of shallow markets is costly and inefficient. Also limited access to finance lowers welfare and hinders poverty reduction and the emergence of an economically active middle class, more fundamentally, inadequate Financial Services Stifles economic growth".
He highlighted that the economic growth that is broad-based is the most effective, efficient and also enduring ways of eradicating poverty, financially develop, which he said can help to reduce poverty in a more direct manner. He said the availability of finance allows small firms and individuals to make use of new growth opportunities.
He said, "Low and stable inflation is possible; that the most crucial prerequisite is effective and efficient domestic resources mobilization and allocation through the financial sector". He quoted from the National Consumer Price Index indicating that the end period inflation was 6.3 per cent in July 2006 and expectations are prices would decelerate to less than 5.0 per cent by the end of December 2007. "The deceleration inflationary pressures should ensure that interest rates remain positive, positive interest rates have the principle effect of raising the quality of investment, thereby increasing the growth rate of output and consequently that of financial savings in a vicious cycle," he said.
According to him maintenance of adequate capital is essential in promoting sound financial system, noting that capital absorbs operating losses and promotes confidence, restricts excessive growth and also provides protection to depositors and creditors. He said "although capital adequacy is dependent on the risk profile of the institution in the Financial Institutions Act (FIA) 2003, the Central Bank has established three (3) minimum capital requirement for finance companies and village savings and credit Associations (VISACAs)," he noted that this comes in the heels of introducing a minimum capital requirements for banks and insurance companies in the amount of D60.0 million and D150.0 million.
Mr. Njai stated "for Finance companies, the minimum unimpaired paid up capital is D5.0 million to be observed latest end September 2008 and D10.0 million by end December 2009. Capital adequacy ratio is set at 16.0 per cent and a gearing ratio of D10.0 times. He dilated that regarding the VISACAs, the minimum capital requirement has been raised to D300, 000.00 from D10, 000.00. He further dilated that the capital adequacy and the gearing ratio are set at 16.0 percent and 10.0 times respectively, this requirements he said are to be observed by the end of March 2007.
Mr. Naji said, "The minimum capital requirement shall mean and include:
1. Fully paid up capital;
2. Balance in the premium account
3. Reserve for bonus shares and
4. General reserves as disclosed on the balance sheet". He noted that any institution that fails to observe the minimum capital requirement shall be ineligible to conduct the business to which it was licensed.
In conclusion Mr. Njai added that Despite the significant amount of resources ploughed into the VISACAs most he said have failed to reach sustainability owing to a number of factors including poor governance, low capital base, poor outreach, dearth of well trained personnel and inadequate support from some of the VISACA promoting institutions.
He highlighted that to address these challenges; the Central Bank would like to see stronger linkages between VISACAs finance companies and banks.
Source: Foroyaa Newspaper Burning Issue
Issue No 108/2007, 14 - 16 September 2007
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