Low confidence affecting microfinance operations

The Managing Director of First Liberty Microfinance, Odeneho Affram Brempong III, has said mobilisation of cheap funds for operations by those in the microfinance business has become a challenge, threatening the survival of many in the industry.

He attributed the dwindling fortunes of the industry to lack of confidence in the work of most microfinance firms as a result of some unfortunate events that befell the industry.

He explained that because of this, microfinance firms find it difficult to mobilise deposits from the public -- thereby making it problematic for them to offer loans at cheaper rates when they source for funds from other financial institutions.

To address this, he said “if people have confidence in the industry and continue to transact business with it while conducting further checks to authenticate the legitimacy of MF firms’ operations, it will contribute to making easy funds available, which could be offered back at cheaper rates”.

He however maintained that when microfinance firms are compelled to borrow at higher rates from banks, there is no way such monies can be given back as loans to the public at lower rates due to operational cost, making microfinance operations very expensive.

Odeneho Affram Brempong III said this in his interaction with the media in Kumasi when management of First Liberty Microfinance met with customers of Above All Microfinance Limited, one the microfinance firms they recently acquired, to address some unresolved problems created by former management of the firm.

He admonished microfinance institutions who after mobilising funds from the public divert them into different businesses which do not yield fast cash flows.

He said the public should be cautious in their dealings with institutions that promise or offer higher returns on deposits, warning that the majority of these dealings are scams.

First Liberty Microfinance, headquartered in Sunyani, recently took over operations of Above All Microfinance located in Kumasi, after the firm ran into debt of about GH?2.6million -- forcing it to seek a bailout from the Sunyani-based firm.

In addition to the acquisition of Above All Microfinance, First Liberty has also taken over two other institutions including Gift Microfinance and First Class Microfinance in the Brong Ahafo and Eastern regions.

The meeting with the customers in Kumasi, which was the second customer engagement forum after the acquisition of Above All Microfinance, was to brief and also assure them of efforts being made by management of First Liberty to settle any outstanding issues.

Benn Kujar, Board Chairman, First Liberty Microfinance, was pleased with the feedback from customers and noted that if other firms had taken cues to engage their clients periodically, particularly in their times of crisis, many of those firms would not have folded up .

He said management is keen on restructuring all the institutions they take over. He said to make its operations much more efficient, ‘liquid’, and able offer better services to customers, First Liberty Microfinance is pursuing strategies to scale-down its branches to eleven.