MPs call for bail-out for DKM customers
Members of Parliament (MPs) Tuesday urged the government to consider the fleecing of depositors by some microfinance institutions in the country as a national disaster and mobilise funds through the Bank of Ghana (BoG) for the victims.
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They said just as the government responded to disasters such as floods and other national emergencies, it should rally to the aid of the victims and offer a financial bail-out to them.
The MPs made the call when the Minister of Finance, Mr Seth Terkper, appeared on the floor of the House to explain the circumstances which led to some microfinance companies failing to pay the deposits of their customers to them, leading to agitations in some parts of the country.
In spite of the explanation given by the minister, the MPs expressed dissatisfaction and said officials of the BoG needed to appear before the House to provide further information.
DKM
DKM used to receive investments from the public and paid impressive interests of up to 80 per cent on the investments.
With clients of more than 3,000 on its books, its network of outlets in Wa in the Upper West Region, Damongo in the Northern Region and Sunyani in the Brong Ahafo Region became life-changing offices for many, including teachers, nurses and artisans.
However, an intervention by the BoG revealed the company's unimpressive shortage of funds, meaning it would not be able to pay the people's investments plus the stated interests.
The company was, therefore, ordered by the Central Bank to refund the investments and stop receiving further deposits.
But the company has not been able to refund the investments, let alone the interests.
Some depositors are said to have committed suicide when it became obvious that they had been swindled by microfinance companies.
Diversion
Mr Terkper told Parliament that DKM Diamond Microfinance Ltd diverted GH¢77.26 million of depositors’ money into the personal businesses of its managers and subsidiaries of the company.
He said an audit conducted by Lobban, Hyde and Partners, a firm of chartered accountants, contracted by the BoG to investigate the financial dealings of the company, revealed that out of a total amount of GH¢115.24 million in deposits that DKM had received from members of the public, only GH¢10.8 million was in its coffers when the agitation by the depositors for the return of their funds reached its peak.
The audit, he said, also confirmed weaknesses such as misreporting to the BoG, mismatches of assets and liabilities, weak governance structures, among other failures.
Terkper's statement
Providing further details on the activities of DKM, Mr Terkper said it had its head office in Sunyani and six branches in Wenchi, Techiman, Bolgatanga, Wa, Berekum and Nkroanza.
The company, he added, was incorporated on April 3, 2013 and granted the licence to operate as a microfinance company on October 25, 2013.
He revealed that the company was attracting deposits from the public at rates of interest ranging between 40 per cent per quarter and 55 per cent for two months, which were unrealistic and unsustainable.
"It also persistently violated the provisions in Act 673 such as limits on borrowings and credit exposures. All efforts to address the problems by the BoG proved futile," he said.
The Finance Minister said the conduct of DKM threatened the safety of customers’ deposits and had the potential of adversely affecting banks, savings and loans companies, rural and community banks and other microfinance institutions operating in Sunyani and its environs.
"The BoG, therefore, requested the Financial Intelligence Centre (FIC) to freeze the accounts of DKM and its affiliated companies to enable investigations into its affairs. A moratorium was placed on its operations and Lobban, Hyde and Partners, a firm of chartered accountants, was appointed to carry out a special audit on the operations of the DKM," he said.
Other operators
Mr Terkper said other unlicensed deposit-taking institutions, through the BoG’s intelligence network, were identified to be engaged in illegal deposit mobilisation and attracting customers with high and unsustainable interest rates.
He named them as God is Love Fun Club, Jasper Motors and Investment Ltd, Little Drops Helping Hand Association, Perfect Edge Group and Care for Humanity Fun Club.
He added that they had been handed over to the law enforcement agencies by the BoG in order to retrieve depositors' funds.
MPs’ statements
The Majority Leader, Mr Alban S.K. Bagbin, said the issue was not only a financial matter but also a security one which needed to be dealt with as such.
He said the BoG had slackened and not lived up to its responsibility of regulating the sector and said it should be made to refund the money lost by the depositors to them.
After the refunds, he said, the BoG should "clean the stables", stringently enforce the laws governing the sector and ensure that the situation did not recur.
The Minority Leader, Mr Osei Kyei-Mensah-Bonsu, said long before the microfinance companies defaulted in releasing funds to depositors, there were reports that the companies were changing depositors’ funds into foreign currencies and diverting them.
Unfortunately, he said, the regulators sat by, watched and failed to act.
He said reports available to him pointed to the fact that many farmers in the Brong Ahafo Region had deposited money with the microfinance institutions, adding that with that development, the farmers would not have money to plant crops when the farming season began.
That, he added, had serious implications for national food security.
"We should consider the entire situation a national emergency," he said.
The MP for New Juaben South, Dr Mark Asibey-Yeboah, said no entity had taken responsibility for the "mess" and observed that no remedial measures had also been announced.
He accused officials of the BoG of failing to enforce the laws and added that some companies were not granted final licences but "approval in principle" which still did not give them the authority to operate.
Yet, he said, those companies displayed the approvals and created the impression that those approvals constituted the final licences with which they could operate.
The MP for Tamale Central, Alhaji Inusah Fuseini, faulted the BoG for being lax and said the situation should not be allowed to recur.
The MP for Dormaa Central, Mr Kwaku Agyeman-Manu, said President John Mahama had nothing to do with the microfinance institutions.
He said the situation was a national disaster and wondered why the FIC, the Economic and Organised Crimes Office (EOCO) and the Bureau of National Investigations (BNI) were not proactive in detecting those activities.
The Brong Ahafo Regional Minister, Mr Eric Opoku, said many of the microfinance companies operated under the guise of fun clubs and sought to know from the minister when the liquidation process would be over and the victims paid.