Story by: Fred Yaw Sarpong
Bank of Ghana, the regulator of the banking industry is in process of increasing the minimum stated capital requirement for micro finance institutions in the country.
Even though the central bank is yet to take the final decision on that, it is likely the minimum capital will be peg at about GHc500,000 for each institution.
The central bank has said that, initially it wanted to increased it to GHc1 million, but it was reduced to GHc100,000 after several negotiations and consultations from the bank and Ghana Association of Microfinance Companies (GAMC’s).
However, there have been several request from GAMC’s and other stakeholders, asking the central bank to increase the stated capital to GHc500,000.
In an interview with Dr. Yaw Gyima-Larbi, Head of Microfinance at Bank of Ghana after the 7th Meeting of Ghana Micro Finance Forum held in Accra, he said initially the GHc100,000 was meant for one branch, but they realized most of the institutions were having between 20 and 22 branches for which they have no control over the branches.
The forum was under the theme ‘Microfinance regulation and compliance.’ It brought together over 100 stakeholders from the industry.
Gyima-Larbi added that from the field and experience they realize the GHc100,000 is inadequate. ‘This brought the situation where some institutions run away with depositor’s money, and this is what we want to avoid,’ said Dr. Gyima-Larbi.
He indicated that reviewing the capital will bring sanity into the industry. He explained that apart from the capital, there are other requirements the companies must meet before licensing. This includes liquidities of the companies.
He stated that some of the micro finance institutions have liquidity problem, so they tried to go beyond the central bank regulations, adding that they will give them time to meet the capital requirement. ‘We want to bring seriousness into micro finance sector. We do not want people to lose their deposits,’ said Dr. Gyima-Larbi.
He emphasized that whenever the stated capital is increased it help the financial institutions to absolve a lot of shocks. He added that some micro finance companies promised their clients unsustainable (80% or 100%) interest rates and when that happens it affects the industry as a whole.
‘Our research shows that those offering unsustainable interest rates are those companies who do not have license to operate. Because those licensed institutions are very carefully with their interest rates,’ said Gyima-Larbi.
Board member of Bank of Ghana, Dr. David Obu Andoh urged the central bank to train the board members and staff of microfinance institutions to manage their respective companies well.