BoG to review licensing regime for microfinance companies

BY: Musah Yahaya Jafaru

The Bank of Ghana (BoG) has decided to review the process of granting licences to microfinance institutions (MFIs) to forestall illegal operations by unqualified MFIs in the country.

Under the review process, the central bank would make personal contacts with purported directors of MFIs to ensure that their names are not used fictitiously for the registration.

The Deputy Governor of the BoG, Mr Millison Narh, and the Head of the Banking Supervision of the BoG, Mr Raymond Amanfu, made this known at a press briefing in Accra yesterday.

The briefing was to give further information on the revocation of the approval in principle granted to 70 MFIs by the central bank last Tuesday.

As part of the review process, the bank has decided to improve collaboration between the BoG and the law enforcement agencies to intensify surveillance of the operations of MFIs.

Besides, the regional staff of the BoG will be equipped to intensify surveillance of the operations of MFIs to ensure that the MFIs do not begin operations after securing the approval in principle, which only prepares them for the financial approval.

The move to revoke the licences of the 70 MFIs came at a time when some microfinance institutions, particularly in the Brong Ahafo Region, found themselves in dire straits as a result of their inability to release huge sums of money belonging  to depositors.

DKM and God is Love, for instance, have had their premises and property ransacked by depositors, including farmers, pensioners, traders, and many other professionals.

 New measures

Expatiating on the measures by the central bank to check the operations of microfinance institutions, the deputy governor said prior to the licensing of every microfinance institution, the applicant was expected to go through two stages of licensing in accordance with the requirements of the Banking Act, 2004 (Act 673) and Non-Bank Financial Institutions Act, 2008 (Act 774).

The first stage of licensing includes submission of an application accompanied by a certificate of incorporation and company regulations, a business plan indicating five-year financial projections and a completed personality notes form to check the fitness and propriety of the shareholders, directors and key management personnel.

“The submission of the above documents does not constitute an approval and the institution is under no circumstance to commence business.

“The registrar of companies has to issue a certificate to commence business to applicants before they can operate and mobilise deposits,” Mr Narh said.

He also said where an applicant’s submission satisfied the BoG, the applicant was then issued with an approval in principle letter to complete the second part of the licensing process, subject to some verifications within six months.

However,  Mr Narh said, the 70 MFIs, despite several reminders including a notice on July 15, 2015, had failed to comply with the requirements, hence the revocation.

“There is a misconception that the licences of the affected MFIs have been revoked. We wish to reiterate that the affected institutions had not been issued with a final approval and a licence to carry on the business of microfinance in accordance with Section 8(1) of the Bank Act, 2004 (Act 673) as amended,” he said.

Mr Narh said the decision to revoke the approval in principle of the 70 MFIs was to mitigate the effect of people losing their money.

He denied the claim by some of the affected MFIs that they had their savings with the BoG.

 Approval in principle

Mr Amanfu said the central bank officials would not abolish the approval in principle as it applied to all applicants, including banks and savings and loans companies.

The revocation of the licences of a number of microfinance companies by the BoG is causing anxiety and stress among thousands of people in the Brong Ahafo Region who have deposited money with those microfinance companies.

The latest to bare their teeth at the BoG were some aggrieved depositors in Berekum who took to the streets of the town to demand the payment of their deposits last Tuesday.

Depositors in Nkoransa have already taken to the streets to draw attention to their plight, caused mainly by the closure of DKM Microfinance Company and various fan clubs operating ‘Susu’ schemes in various parts of the Brong Ahafo Region.

The Berekum demonstrators gave a two-week ultimatum to the BoG to ensure that the money they had invested in the microfinance institutions was paid back or they would advise themselves.

The government and the opposition New Patriotic Party (NPP) in the Brong Ahafo Region are engaged in a blame game over the operations of microfinance companies in the region.

In May this year, the BoG slapped some of the financial institutions and fan clubs, including DKM Microfinance, God Is Love Fan Club, Care for Humanity with a 90-day suspension.

It emerged that although DKM had collected about GH¢100 million from its customers, it had only GH¢11 million in its accounts.

 God Is Love had also collected a lot of money from people in the region but it emerged that it was operating as a fan club.