Plans to sanitise microfinance operations underway

The Ghana Microfinance Institutions Network (GHAMFIN) is set to adopt a unified code of conduct as part of several measures to inject sanity into an industry that has seen several players collapse.

According to GHAMFIN, more than 46 MFIs collapsed in 2013 alone due to bad managerial skills, poor product designs among others, which has prompted calls for measures to curtail the rapid failure of micro finance institutions (MFIs).

The Chairman of GHAMFIN’s Council, Emmanuel O. Darko, explained to members at the 6th annual general meeting of the Network that the sustainability of MFIs remains a critical issue for the industry.

This year’s meeting was held of the theme “Promoting Industry Transparency through a unified code of conduct”.

GHAMFIN is a network of apex associations and their member-institutions engaged in the provision of microfinance services. It comprises a diverse range of microfinance sector actors including the ARB Apex Bank, Association of Financial NGOs, Ghana Cooperative Credit Unions Association (CUA), and Ghana Cooperative Susu Collectors Association (GCSA).

Other members include the Ghana Association of Savings and Loans Companies (GHASALC), Ghana Association of Microfinance Companies (GAMC) and Money Lenders Association of Ghana (MLAG).

Through the support of SEEP Network -- a global network of international practitioner organisations dedicated to combatting poverty through promoting inclusive markets and financial systems, GHAMFIN has developed an Industry Code of Conduct which according to Mr. Darko will be circulated to all members for implementation.

The introduction of the code of conduct comes at a time the sector regulator, Bank of Ghana, is considering issuing directives on product transparency and a complaint or recourse mechanism as means to protect financial consumers.

Cynthia Odonkor, who heads the GIZ Responsible Finance Project, speaking at the AGM said: “Transparency and information disclosure has become a very big issue in the microfinance sector. In particular, there is lack of full disclosure on pricing of financial service and products, especially, fees and charges.”

Ms. Odonkor added: “There is a need for practitioners to be transparent in providing information on pricing, terms and conditions as well as all other features of a product to clients, to guide them in selecting appropriate products that suit their needs.

“Microfinance service providers need to address this issue by ensuring that MFIs communicate full information on their products and services to their clients in a clear, concise and transparent manner, and in language that clients can understand so that they can make informed decisions about product choices.”

According to Ms. Odonkor, who is also the National Expert, Financial Literacy and Consumer Protection at GIZ, clients of microfinance companies must be provided with an avenue to seek redress when they are aggrieved or treated unfairly.

She added that the introduction of a code of conduct aimed at ensuring microfinance practitioners adhere to some core principles on good ethics and practices in their dealings with their clients is a necessary step.