SDC Finance faces liquidity crisis amid Government payment delays
Finance House, SDC Finance Limited, has found itself grappling with a severe liquidity crisis as a result of delayed government payments, leading to disruptions in its operations. CEO of SDC Finance Limited Mathais Dorfe, recently reached out to investors to provide an update on the situation and outline measures to address the challenges.
SDC Finance Limited, known for its business model of utilizing public deposits to finance Government Road contractors, which in turn assign their receivables as loan repayment instruments, experienced a setback in 2022. The root cause of this setback was the government’s failure to make adequate and timely payments for these receivables, resulting in a liquidity crisis that has persisted into 2023.
Mr Dorfe acknowledged that, as a consequence of this crisis, the company has been unable to meet customer withdrawal requests as promptly as in the past. Despite shareholders injecting an additional GHS20 million in capital in 2022 to bolster the institution, these funds were rapidly depleted while addressing customer withdrawal demands. Subsequent attempts to secure liquidity support from the Bank of Ghana were also unsuccessful.
Furthermore, the crisis has constrained SDC Finance Limited from engaging in new business activities necessary to generate income to cover interest accruals on investments in 2023. Anticipated government receivables, while expected to be received, will only suffice to cover investment balances as of December 31, 2022, excluding accrued interest beyond that date.
To address these challenges, SDC Finance Limited has proposed suspending the accrual of interest on accounts from January 2023 onward. The company will redirect its efforts toward collecting government receivables to settle all balances as of December 31, 2022. Meanwhile, the interest accrued from January to June 2023 will be temporarily held in an interest suspense account. Consequently, rolling over investments will no longer be a viable option.
The institution in a letter to investors, says it is committed to providing investors with detailed information regarding its proposed payment plan through electronic mail, hard copy letters, or WhatsApp, depending on investors’ contact information. These proposals, informed by extensive discussions with investors who have engaged with the company, represent SDC Finance Limited’s most realistic approach to mitigate the impact of the crisis on investors’ portfolios.
SDC Finance Limited expressed its appreciation for the continued support of its investors and appealed for patience and understanding during these challenging times as the company works diligently to resolve the issues.
