The emergence of micro finance institutions (MFIs) across the country appears to be a relief for most small scale enterprises and individuals as a result of the quick financial support they offer patrons.
While some persons and small businesses are able to secure the required loan facilities, others see these institutions as convenient places they can save due to their simple processes and proximity to homes and workplaces.
The MFIs include savings and loans companies, cooperative money lenders and the indigenous ‘Susu’ savings groups, which have nationwide presence.
The MFIs, which are mostly deposit taking financial institutions, are regulated by the Bank of Ghana under the Non Bank Financial Institutions Act, 2008 (Act 774) and the Banking Act, 2004 (Act,673). They have a minimum capital requirement of GH¢ 100,000 much lower than that of the universal banks which is GH¢60 million and that for rural and community banks which is GH¢150,000.
However, the target of these institutions is mostly small scale enterprises and households whose funds are deposited daily.
But one question that should be of concern to all is the credibility of such emerging institutions and how secure such investments are in the face of heightened fraudulent activities.
REGULATING THESE INSTITUTIONS
The Central Bank in a release issued in July last year prescribed new operating rules and guidelines for the various non-bank institutions, including a required minimum capital which entitles operators to a license to operate.
The deadline for the directive which was January 1, 2012 is long past although the various associations are striving to get their members registered for subsequent licensing.
The Chief Executive Officer of the Ghana Association of Microfinance Companies (GAMC), Mr Collins Amponsah-Mensah, in an interview with the GRAPHIC BUSINESS after the January 1 deadline said that, the association had registered 443 new members out of which only 112 had been granted provisional licenses to operate.
This number reveals that the directive had not been adhered to and most of these institutions are thus operating without the requisite licenses.
“The Bank of Ghana has granted provisional license to 112 companies. This is the first step in the licensing process. A final license is issued only after the Bank of Ghana has conducted its onsite visits and is satisfied with the structures in place. To date no final license has been issued,” Amponsah-Mensah said, explaining that the issuance of a provisional licence did not constitute a licence.
Therefore MFIs are discouraged from holding themselves out as licensed MFIs until the final license is issued,” he said.
The acting General Secretary of the Ghana Co-operative Susu Collectors Association (GCSCA), Mr Obed Yaw Asamany, told the GRAPHIC BUSINESS in a separate interview that only 400 individuals and enterprise Susu operators had registered as against the projected 1,000 members six months after the end of the Bank of Ghana’s January 1 deadline.
Currently, those 400 registered members are being screened by the Bank of Ghana to enable them to be issued with licenses to operate. Out of the number, the central bank had completed due diligence on 200 applicants who are expected to be issued with licenses soon.
The regulator of the institutions, the Bank of Ghana, has not announced its next line of action after the deadline elapsed and some financial analysts fear the laxity would offer the leeway to some operators to flout the law – operate without licence – and thus put the public investor at risk.
THE INDUSTRY TODAY
Due to their wide spread, the operation of MFIs without licenses puts their patrons at risk, as many people engage their services without cross-checking and authenticating their liquidity.
Currently, it is very worrying to observe how some people were being frustrated in getting their investments back from some companies they had saved with for a while.
While others are lucky to have had their investments back after much stress, others are currently pursuing theirs with the hope of obtaining it soon.
Recent blacklisting of some companies by the Bank of Ghana also amplify how serious and risky the unregulated operations of microfinance companies are. Some of the blacklisted companies are MEDLORM Microfinance Ltd; African Guarantee Trust, Abbey Cash Microfinance Ltd and Swift Financial Services.
These companies according to the bank have neither applied for licensing neither have they been licensed.
Mr Amponsah- Mensah thus advised the public to be vigilant, saying “any investment which promises returns too good to believe must be avoided. The public also has a responsibility towards each other to ensure that such fraudsters are flushed out. The responsibility to protect public funds is a collective responsibility.” GB
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