Financial Services Crises: The Human Cost
I have a long-time friend who used to work in an international bank. He took a package and left the bank to form a finance company.
I was his first auditor. I dropped the audit and any plans I had then to build finance company clients. Two reasons drove the decision. Financial services audit is no ordinary audit. They require specialist skills that are difficult to develop or readily find. It worried me that losing key staff will undermine our ability to do a good job. Second, I didn’t like the risks and an aspect of the banking law that required finance companies to report on 31st December.
So, we dropped the audit and our ambitions. The banks and finance company were making money and would pay a better fee than other industries, but we dropped it.
Imagine my shock when one of my partners showed me a list of finance companies whose licenses had been revoked. His firm was on the list! Looking at his firm from a distance, I thought he was better organized and run than most.
We’ve blamed the problems of the financial services sector on poor management and governance. I don’t buy all of that. I wonder what role the economy played in their problems. All those institutions were not that poorly run. The financial services sector is vulnerable to a poor economy in which many businesses struggle.
Almost 15 years of effort gone in a puff! How many other businesses are gone with it? What about those employed and their dependents? At the rate that businesses have collapsed, who will employ and provide exposure to skills for the many who need it?
Why would you invest in an economy in which there is no continuity in government policies and the cost of doing business is so high?
Accounting and Audit Professional
5yTo a certain extent I will blame the financial sector crises on competition as well. The sector employed a lot of people with each firm wanting to outsmart the other. So most of this firms never thought of insuring the funds. For example, I know of someone.who lost his job a few months into the repayment of a loan he took from one of this multinational banks. The terms of the loan included an insurance cover for the loan. This guy received no package from the company and still doesn't have a job. But the bank had not really put much pressure because of the insurance on the loan. Maybe next time our Micro Finance houses and others should also look at insuring and giving realistic promises in terms of interest rates. It is better to give realistic returns on investors than to have borrower who can't keep up with payments.
Accounts Officer
5yMr Katako I think U have said everything concerning this unjust closure of businesses all in the name of #Clean Up exercise, one of the said entities closed down as a result of Liquidity issues recently published a list of their debtors and surprisingly Government is their biggest debtors. Hmm what a country, What a #Clean Up exercise.