Huge MFIs pose challenge to BoG -Dr. Wampah

The Governor of the Central Bank Dr. Henry Wampah says policing the huge number of micro-finance institutions (MFIs) poses an uphill task for the industry regulator.

Speaking at a public discussion organised by the Institute of Statistical, Social and Economic Research (ISSER) last week, Dr. Wampah said many MFIs exploited the low minimum capital requirements leading to an explosion their numbers, a situation he said the Central Bank is taking steps to rectify.

“It is true we need MFIs, but we also need some order in their development. Currently we have licenced close to 300 MFIs while others are yet to acquire their licences -- with some dubious ones operating without the requisite permit. Policing this huge number of MFIs is not a small job,” he added.

The Central Bank last month revised its operating rules and guidelines for microfinance institutions, categorising the sector into two: Tier 2 for deposit-taking and Tier 3 for non-deposit taking institutions.

According to the revised rules, new entrants applying to operate as non-deposit taking firms will require a minimum paid-up capital of GH¢300,000 whilst deposit-taking institutions require a minimum of GH¢500,000.

Also, the guidelines gave existing microfinance companies up to 30th June, 2016 to meet the new requirements. Institutions with 1-5 branches attract an additional paid-up capital of GH¢100,000 for each branch, whilst those with more than 5 branches attract an additional GH¢200,000 for each branch.

“Not more than 25% of initial paid-up capital or additional capital for branches shall be spent on property, plant and equipment (capital expenditure). That is, at least 75% of all initial paid-up capital and/or additional capital shall be in liquid cash resources to support operations,” read the guideline.

The upward review of the MFI minimum capital requirements has been criticised by a section of stakeholders in the sector who are proposing the central bank takes a second look at its supervisory role over the sector.

According to Mr. Kwame Basoa, Chief Executive Officer of Heritage Microfinance, an efficient supervision over the sector will ensure efficiency in the industry irrespective of the MFI’s capital base.

“The review of minimum capital requirement may not necessarily be the solution to bringing an end to the challenges and ‘controversies’ the industry is battling with. Dubious characters could still be in the business however huge their minimum capital deposit may be,” he added.

The Central Bank, he said, needs to up its supervisory role in order to ensure that phony MFIs that exist to dupe customers are flushed out from the sector.