Micro-credit industry must brace for capital requirement - Prof. Atta Peprah

The Dean of the School of Economics at the University of Cape Coast (UCC), Professor James Atta Peprah, is predicting that the Bank of Ghana (BoG) may sooner or later review requirements for the micro-credit industry – leading to an upward adjustment of their minimum capital requirement.

As a tier-four operators in the country’s financial ecosystem, there’s currently no minimum capital requirement for the industry.

For individuals or enterprises to venture into the industry, they are only required to obtain and complete a preliminary registration form for licencing as a Susu collector or money lender, and register as a member or affiliate with the umbrella organisation for Susu collectors or money lenders.

They will then submit the completed preliminary form, together with a personality profile form endorsed by the executives of the umbrella association to the Bank of Ghana to be licenced after obtaining satisfactory reports on background checks undertaken following payment of the application processing fee at GH¢100 and licensing fee of GH¢500, according to a 2019 BoG document titled ‘Requirements For Applying For Microfinance Institution Operating Licence’.

But speaking at the launch of the Micro-Credit Association of Ghana’s (MCAG) Member Portal and Enterprise Response Planning (ERP) Software on Tuesday, May 16, 2023 in Accra, Professor Peprah urged the industry to brace itself for the impending development.

“As tier-four category, MCAG has proven to be the backbone of the micro finance industry. This association is the backbone of the industry. Membership has grown steadily…maybe because there’s no minimum capital requirement. But we should also be getting ready. Let’s prepare and hold ourselves in readiness for the [introduction of minimum] capital requirement,” he stated.

Data critical to growth of industry

The MCAG Member Portal is a unique Regulatory Technology (Regtech) platform designed primarily to enhance regulatory reporting and provide accurate and timely data to all stakeholders. And it was developed to provide real-time updates, reports and data. Additionally, it gives a global picture of the micro-credit industry’s performance.

Speaking on the topic Online Reporting: Significance And Implications For Financial Inclusion And Evidenced-Based Policy as the keynote speaker, Professor Prepah praised MCAG for launching the platform and underscored the importance of data in deepening financial knowledge measurement as part of national strategies to promote financial inclusion.

He said evidence-based policy can be obtained from quality, reliable and timely data, leading to policy interventions that will drive the sector on its own data. “Poor data means wrong policies for the sector,” he stated.

The Executive Director of MCAG, Ebenezer Quartey Esq., highlighted the critical role that data plays in any decision-making process, saying: “Good data will strengthen MCAG’s business case for more development assistance in the future.

“It will also generate evidence of programme impact…and most importantly, it will provide early warning signals that will enable the regulator to identify systemic risks and implement prudential controls to safeguard the financial system,” he stated.

He said following launch of the platform and ERP Software, the micro-credit space is now poised to engage in evidence-based discourse with policymakers, development partners and all stakeholders in order to advance its collective goals.

Describing the launch as historic, the Board chairman of MCAG, Wilberforce Ofori, said data has become a very important resource, given the rapid advancement in technology.

“Our world now revolves around data, and for us in the microfinance industry it has become an indispensable tool for the fight against poverty; and one of the challenges we have faced as an industry over the period is lack of availability of accurate data to back our story and the contributions we have made in the microfinance space,” he said.

The Member Platform and the ERP Software were a result of partnership between MCAG and GIZ – which has been MCAG’s backbone, providing technical assistance and financial support for the Association’s programmes and activities.