The Unintended Effects of Bank of Ghana’s Clean-Up Exercise on Unaffected Financial Institutions: Evidence from Yilo Krobo Municipality, Ghana

This paper seeks to analyze the unintended accompanying effects of the Bank of Ghana’s financial sector sanitization popularly referred to as “clean-up exercise” which ended in August 2019 on the operations of unaffected financial institutions with ardent interest in customer deposits or investment and lending activities. The mixed-method approach thus, using both quantitative and qualitative methods of collecting data, was deployed for the study. The study population covered branch managers, credit officers, and cashiers of all financial institutions that were not affected by the Bank of Ghana clean-up exercise in the Yilo Krobo Municipality, Ghana. The findings of the study revealed that deposits have generally been low, whereas withdrawals have been very high, and these were due to fear and panic of losing funds or investments and loss of confidence among the banking population. On the other hand, lending activities have not been affected as customers of defunct financial institutions have shifted their loan demands or requests to the unaffected ones. However, some financial institutions are unable to meet loan request from their customers due to liquidity challenges arising from low cash deposits. The study recommends strict regulatory enforcement, periodic publishing of financial institutions in good standing, and timely education of customers of financial institutions in the event of any possible revocation of the license of any Financial Institution.