MFIs must consolidate to attract investors

Microfinance institutions must consolidate to attract investments from outside the country, says Ademola Adetosoye, Executive Director of The Microfinance Association -- an international non-profit professional membership organisation for practitioners in the microfinance industry.

Mr. Adetosoye noted that investors are ready to invest in Ghana’s MFIs, but the size of the institutions is a “turn-off”.

“One of the key problems at the moment is the size of MFIs. They are too small and get investors turned off. They are too small for them to invest in. The size of MFIs in the country cannot even allow investments of a minimum US$1million,” he said.

Speaking at the International Investors’ Forum on Microfinance in Accra, organised by the Ghana Microfinance Institutions Network (GHAMFIN) and The Microfinance Association, Mr. Adetosoye explained that due to the size of the MFIs in Ghana, investors are looking at economies like Nigeria and Kenya that have sizable MFIs which serve the underserved.

“A lot of the investors have different criteria but they can’t be investing in institutions that have only one director and two staff. Investors want to see structures in place, a board of directors, good risk management process, an institution that can absorb what they have to offer,” he added.

Stressing the need for mergers or consolidations, Mr. Adetosoye added that in order for Nigerian MFIs to attract bigger investors the system was restructured -- and today they are benefitting from big investments.

“I would recommend that they consolidate, and then the central bank must look at the regulations again because there are too many MFIs; and even though their capital requirements have been increased, a lot more needs to be done to create bigger institutions,” he added.

Ghana has over 500 registered microfinance institutions; and despite the increment of stated capital requirement for the sector from GH¢100,000 to GH¢2million, interest in establishing new MFIs is still high -- with applications for licence sent to the central bank regularly.

The forum brought together about 15 investors from the United States of America (USA), United Kingdom (UK), Netherlands and other European countries to interact with Ghanaian MFIs for possible investments.

Some of the investors who participated in the two-day conference were Incofin Investment Management; Oiko Credit; Blue Orchard; Microfinance and Small Loans Centre (MASLOC); Progression Africa; Goodwell; JCS Investments; Cyrano Management; Planet Finance; MicroCredit Ventures; Accion International; Symbiotics; ADA; and LakeDale Global Development.

Yaw Gyamfi, Executive Director of GHAMFIN -- a network of apex associations and their member institutions engaged in the provision of microfinance services, explained that the forum’s main aim was to bring investors and MFIs together to talk to each other on how to become bigger and better.

He explained that despite the interest from investors, MFIs in Ghana must put their house in order so as to attract the required investments for growth.

“At the end of the day, we expect collaborations between the investors and MFIs. It takes time to access funds, and so this is a process to aid the MFIs restructure and attract great investments, and position themselves to attract even more investments.

“This is therefore a first step, whereby institutions will really open their doors to scrutiny and then follow up and secure funding to beef-up their portfolios. This means if we intend to bring people out of poverty, then we need bigger institutions that are well-structured,” Mr. Gyamfi added.