Implications of the Recent Utility/Fuel Price Hikes on the Ghanaian Economy Reflections on Recent Developments and Regulatory Directives in Microfinance

17th February 2016 Sasakawa Conference Centre

University of Cape CoastImplications of the Recent Utility/Fuel Price Hikes on the Ghanaian EconomyImplications

•       Government –      Increase in Revenue for Development –      Provisions and Availability of Utilities –      Financial Sustainability of the Utility Sector •       Households –      Increase in cost  (Transportation,  Commodities etc) –      Reduction in Real  Income (Spending) –      Increased Unemployment –      Decrease in Welfare •       Industry –      Increase in Cost of Production (labour and capital ) –      Low Productivity  and  Low Profits –      Redundancy (lay-off  of workers) and Closure of firms Recommendations •       Revenue –      Widening the tax base -  more of the informal sector –      Block leakages and wastages ( wasteful activities and corruption) •       Utilities –      Key energy-intensive industrial firms must be encouraged to adopt newer technologies that help to reduce the energy-intensity –      Review the current electricity tariff structure (reduction in subsidization  of non-productive sector –      Reduction in distribution losses and improvement in efficiency  

Reflections on Recent Developments and Regulatory Directives in Microfinance Developments

•       The microfinance sector at a crossroads (From Micro to Macro) •       Landscape has changed considerably –      More heterogeneous, Entry is confused , Regulation is Confused –      Funding landscape has changed, MFIs Numbers have increased –      Real Competition  is still missing •       Results and Implications –      Non-performing loans –      Withdrawal of deposits as a result of panic and lost of confidence –      Increase in default (delinquency) –      Moral Hazard –      Public Panic and Outcry The way forward •       Government Responsibility - Guarantee -  embedded in the regulation –      Embargo on the Start-up of MFIs/Operations –      Improvement Risk Management Systems –      Improvement of Institutional/Governance Structures –      Training and capacity building - standardized. –      Improvement of Market infrastructure     •       Credit referencing: •       Consumer protection •       Deposit protection –      Rebuild Confidence in the Sub-Sector (educational campaigns, rating of institutions, credit bureaus) –      Improving Financial Literacy Summary •       The hikes in the utility and fuel prices have negatively affected the welfare of the citizenry. •       The recent developments in the Microfinance sector have negatively affected the finances of the clientele of the dubious Institutions •       Government policies should always seek to maximize the welfare of the citizenry