BoG to prosecute offending micro-finance institutions

The Bank of Ghana says it would close down and prosecute micro-finance institutions (MFI), which are operating without licence from the bank. The Bank is also collaborating with appropriate authorities to investigate MFI, which defraud unsuspecting customers.

Mr Raymond Amanfo, Director of other Financial Institutions Supervision Dept, said the Bank constantly dialogues with operators in the industry on strategic and operational issues. Mr. Amanfo made this known at the panel session on micro-finance, as part of the Second University of Ghana Business School Conference on Business and Development in Accra on the theme: “Sustainability on Enterprise Development.”

He said the bank sees micro-finance institutions in Ghana as agents or catalyst for the realization of the dreams of economic prosperity. He gave the assurance that the bank would continue to provide a sound regulatory environment for the micro-finance sector.

“We also expect practitioners to engage in prudent activities, aimed at protecting customers, maximizing profits and providing meaningful micro-finance services to the poor,” he added. He said the bank would continue to engage the micro-finance institutions Apex bodies on issues affecting the industry so as to find workable solutions to existing challenges.

Mr Amanfo said the Central Bank was also helping these institutions to refocus on their primary and core mandate of providing efficient and effective financial services to the poor.

He said some of the challenges facing the micro-finance institutions include poor liquidity management skills due to inexperience weak credit administration, policies and practices, the diversion of loanable funds into unprofitable and unsustainable projects, as well as the irregular submission of prudential returns to the Bank of Ghana.

He said the Central Bank has issued final licences to a total of 447 MFI, with the breakdown as 390 micro-finance companies, 50 money lending companies and seven financial Non-Governmental Organisations. He said at the end of May, this year, the total assets of these institutions stood at GH?688.45 million, representing about 1.0 per cent of the total assets of the banking industry.

Loans and advances granted by the micro-finance institutions amounted to GH¢343.53 million during the same period. “Total deposits mobilized during the period, on the other hand, totaled GH¢344.75 million with borrowings amounting to GH¢186.23 million,” he added.

The Director said the bank has started receiving prudential returns from the licensed MFI, while the bank is also embarking on on-site examination of some of these institutions.

“The Central Bank, in collaboration with the Ministry of Finance has organised series of financial literacy programmes to educate and inform the public on micro-finance activities,” he said.