3 Reasons Mutual Funds/ Banks Can Not Opt Out Of Haircut In Ghana
Teaser 1: Mutual funds, especially those owned by labour unions like GNAT and HSWU are only bluffing that they will not partake in the bond haircut by the government. They have no choice. Find out the three (3) reasons
Teaser 2: The government was smart by declaring the haircut on bonds is optional. It is never optional. The mutual funds and banks have no choice. It is apparent that the haircut is actually a military recruit haircut without an option to opt out, though presented as a “krakye” decision with lots of personal choice.
The following are the three (3) reasons mutual funds and banks can not opt out of the government haircut scheme.
1. First and foremost, mutual funds and banks have huge savings such that they can not give everything to customers and members as loans. The question, therefore, is where can they possibly put such remaining amounts, since they must be kept/ invested somewhere? The balance will definitely go into the barbering shop bonds.
2. Secondly, all other institutions in the country where any of the deposit taking or contribution taking mutual funds could channel their savings in order to avoid the haircut are also already having their funds invested in the haircut saloon (bond market). The implication is that there is no place else in the country to channel members’ funds aside into the haircut bond.
See also: The “Forum” of Labour Unions Is Clearly Divided Over Haircut [Check out the unions missing]
3. Thirdly, mutual funds and banks have the option to send their funds abroad for investment. However, the weak currency exchange regime and the hustle of withdrawing such funds for easy operations means there is a disincentive for mutual funds and banks to send their funds abroad.
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It is therefore apparent that the haircut is actually a military recruit haircut without an option to opt out, though presented as a “krakye” decision with lots of personal choice.
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