Corporate restructuring and financial performance in the Savings and Loans industry: the case study of First Allied and Savings and Loans Bank

Loading...
Thumbnail Image
Date
2008-09-13
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The savings and Loans Industry (S & L) is classified as a Non Bank Financial Institution (NBF) and is statutorily defined by the Financial Institution (Non-Banking) Law 1993, PNDC Law 328 and licensed by the Bank of Ghana. The S&L provides financial intermediary services for its client. These financial services are very limited in nature and are not regulated by the Banking Act. The financial services sector has seen tremendous growth in size and increased level of innovation and competitive positioning in recent years with little success in the financial intermediation process. This positive growth has been carefully contained to avoid collapse by the creation of an enabling regulatory environment and supervisory roles by the appropriate financial regulatory bodies. In this direction, the Bank of Ghana has issued a Business Rule that scheduled 31st December 2004 as the deadline for compliance by S&L Companies to raise their stated capital of ยข15 billion. It further directed that within this time frame all non-compliant institutions should have the commitment of shareholders to inject the new required capital, merge with other financial institution, and acquire a takeover by institutional investors or individuals as the options available at ensuring compliance. It further indicated that by the 31st of December 2005 any Savings and Loans Company which fails to meet this directive will be closed down. This urgent need for capital injection to the minimum stated capital has really set the for capital mobilization amongst these companies since 2004. This directive has therefore necessitated corporate restructuring amongst these institutions. The First Allied Savings and Loans (FASL) has responded to this directive capital injection by a strategic investor with its concomitant corporate restructuring. The study investigated the impact of this capital injection and by extension corporate restructuring on firms that have been able to meet the new capital requirements. Although the restructuring process has few associated constraints or setbacks it achieved a significant progression in the motivation of staff, growth performance and profitability of FASL. The Management Team underwent very pronounced capacity building exercise of First Allied Savings and Loans (FASL) has increased following the corporate restructuring activities through the development of two new loan products and increased promotional drive geared towards increasing their customer base. It is recommended that First Allied Savings and Loans (FASL) enlist on the Ghana Stock Exchange in order to allow more funds for growth and expansion. Additionally the strong drive to continuously improve on the performance and profitability of this business entity following listing will characterize its operations.
Description
A thesis submitted to the KNUST School of Business in partial fulfilment of the requirements of the degree of Masters in Business Administration, 2008
Keywords
Citation
Collections