Reasons behind BoG decision to closedown Dream Finance Limited (DFL)

Dream Finance Limited (DFL) was licensed by the Bank of Ghana on October 25, 2013 as a Finance Company.

Based on a 2015 review of the institutions operations, Bank of Ghana found Dream Finance to be insolvent and also facing liquidity challenges mainly as a result of the institution’s non-performing exposures to its related companies. The Bank of Ghana subsequently engaged the directors of the institution and agreed on a timeline to resolve the solvency and liquidity challenges. The institution failed to comply with the agreed plan. The institution’s capital adequacy ratio and net worth are both negative as at end-May 2019.

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Specific issues that led to the revocation of the institution’s license

a. The institution’s Net worth of negative GH¢333.46 million as at end May 2019 indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.

b. The institution’s capital adequacy ratio of negative 7,508.10% as at end May 2019 is in violation of Section 29(2) of Act 930.

c. The use of depositors’ funds to finance related-party projects. The institution is overexposed to six (6) of its related companies. The non-performing related party exposures have contributed significantly to the liquidity challenges of the institution.

d. The institution has persistently breached the cash reserve ratio requirement since 2015 due to serious liquidity challenges. It is also unable to honour customer’s withdrawal requests.

e. The institution changed its name from Dream Finance Limited to El Finance Limited and also relocated its Head Office without the prior approval of the Bank of Ghana.

f. Weaknesses in corporate governance practices as the institution is without a functioning board and key management personnel with the relevant qualifications and experience to do the business of banking.

g. The institution was involved in creative accounting practices, thereby misrepresenting and misreporting its true financial position to the Bank of Ghana.

h. The institution failed to implement Bank of Ghana on-site examination recommendations.

i. The institution is currently not engaged in normal business activities as a result of its capital and liquidity challenges.