Thousands of frustrated and agitated customers of four microfinance companies in the country are piling pressure on the companies to retrieve their locked up lifetime savings.
This follows many failed attempts by the customers to access their savings.
The incident signals another round of a ticking time bomb for the financial sector as directors of the AGT Microfinance, the Man Capital Microfinance, the McOttley Money Lending and the Alpha Capital Savings and Loans companies are being chased around by frustrated customers, whose investments have long past their maturity dates.
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The Economic and Organised Crime Organisation (EOCO) is currently probing directors of the AGT and other microfinance companies across the country for their inability to pay over 3,000 customers their savings.
The AGT, which has 14 branches dotted around the capital and its environs, is said to hold up more than GH¢10 million of customers’ savings.
A source at AGT told the Daily Graphic, on condition of anonymity, that each of the 14 branches had more than 200 customers who were uncertain about when their money would be repaid.
When contacted, the Group Chief Executive of McOttley Holdings, Mr Richard Dughan, confirmed, by an email enquiry, to the Daily Graphic that the McOttley Money Lending subsidiary was going through some difficulties recovering its loans which had, thus, affected the company’s ability to meet clients withdrawal request.
“This delay in meeting clients request has caused some few agitations”, he stated.
He explained that most of the loan clients were government contractors who were awaiting payment from the government to be able to retire their loans with the company.
“We have more than GH¢20 million locked up as loans to some investors who have worked for the government and are yet to be paid for the various contracts they have executed”, he said.
"We have so far settled most of our customers now and still working around the clock to satisfy all our clients as soon as practicable,” he added.
ManCapital on payment plan
The Chief Executive Officer of the ManCapital Microfinance, Mr Michael Allan Asare, also narrated a similar story that most of the deposits extended to other customers as loans had not been repaid.
“See, we have more than GH¢15 million sitting in our books as loans to some customers who have defaulted in repayment, which is why we are having these challenges”, he said.
Mr Allan Asare said the company was planning a payment schedule with some of the agitated customers who, he said, could be very aggressive.
However, checks by the Daily Graphic show a huge gap between deposits and assets, which means that large sums of the funds have been diverted into some other businesses.
The Daily Graphic can confirm that assets management and insurance companies have heavily invested in the distressed microfinance companies that had triggered the Securities and Exchange Commission to initiate investigations.
BoG to sanitise sector
The Head of other Financial Institutions Supervision Department (OFISD) of the Bank of Ghana (BoG), Mr Kofi Amoa-Awuah, has hinted that the central bank was sanitising the microfinance sector with the suspension of fresh licensing since 2016, when the challenges first began.
“We are also containing the problem by closing down loss-making companies and those that require further investigations have been forwarded to EOCO”, he added.
“We have increased the numbers, we have increased the mechanisms as well, we have sent people to the regions, so we have done something to strengthen supervision of these microfinance companies," Mr Amoa-Awuah said.
“We have also asked them to stop opening new branches and giving out fresh loans and fresh deposits and concentrate on paying their clients” he added.
In 2016, the BoG revoked the licences of 70 microfinance institutions in the country for their inability to match liabilities with assets.
There are currently 546 microfinance institutions, comprising 468 microfinance companies, 67 money-lending ones and 11 financial non-governmental organisations.
In 2016, the BoG increased the minimum paid-up capital for microfinance companies and money lending companies from GH¢500,000 and GH¢300,000 respectively to GH¢2,000,000 and that all existing microfinance institutions had up to December 2018 to meet the capital requirements.
Now, fresh entrants will require the GH¢2 million prior to the granting of final licence and that the convergence of capital requirement for microfinance companies and money-lending companies is to avoid regulatory arbitrage.
A major financial crisis hit the microfinance sector in 2015 when the BOG suspended the operations of the DKM Diamond Microfinance Company Limited for violating the Banking Act.
After customers complained of the firm’s inability to pay their claims, the BoG gave DKM a month to raise GH¢50 million in addition to the GH¢10.7 million the firm had in its vault, so it could be cleared to resume operations and pay its investors their due principals and accrued interests.
But the DKM was unable to do so, despite an extension of the grace period accorded it by the central bank.
The CEO of the DKM, Mr Martin Delle, is currently being prosecuted in connection with the scandal.