It is exactly three years since October 2017 when the B&FT exclusively reported that the central bank had begun stakeholder consultations on establishing an apex body for microfinance institutions in the country, in the form of an ARB Apex Bank for rural and community banks (RCBs).
But so far, nothing of note has come out of it – which has led to the Ghana Association of Microfinance Companies (GAMC) urging government to expedite moves for the establishment of such a body, since it will help formulate policies and regulate the sector – which includes microfinance companies, savings and loans companies, finance houses, and microcredits – in a manner that will stimulate its full potential and ensure it contributes meaningfully to economic growth.
Board Chairman of the Ghana Association of Microfinance Companies (GAMC), Lambert Osei Kofi, told the B&FT that on the back of its financial sector clean-up, the Bank of Ghana (BoG) stressed to industry players that an apex body would be set up to fashion policies for the microfinance sector – geared at supporting its growth and ensuring stricter operational guidelines, but that is yet to materialise.
“The advent of COVID-19 brought with it some new challenges, necessitating the GAMC’s reiteration of an apex body to ensure supervision and development of quality microfinance services in the country,” he said at the association’s recent annual general meeting.
When the central bank began stakeholder engagements in 2017 with private consultants, the industry’s associations and the World Bank to introduce an apex body, there were more than 700 microfinance companies, savings and loans companies, finance houses, micro-credit institutions and financial NGOs.
Currently, even though there are 216 such institutions, industry players are of the firm belief that the regulator is still overwhelmed with monetary policy, regulating banks and other financial institutions; hence the need for a standalone body to sanitise the space, just like the ARB Apex Bank for RCBs which are 144 in number.
The central bank has also introduced new business rules for MFIs, adjusting capital requirement upward and requiring MFIs to have a public governance policy under which they are to establish several committees – but proponents of the apex body are still not satisfied.
Even the passage of three bills into law and their subsequent operationalisation – the Ghana Deposit Protection Act, the Banks and Specialised Deposit Taking Institutions Act as well as the Securities Industry Act – to help sanitise the financial industry, is yet to move these players who are of the strong view that an apex body will do a better job of scrutinising MFIs in particular.
For Mr. Osei Kofi, something like the introduction of an apex body that reports to the central bank must be done to address low public confidence in MFIs, low liquidity levels, reduced deposit mobilisation, job-losses and the high level of non-performing loans the sector is facing, which were caused partly by the clean-up exercise.
He also recounted the impact of COVID-19 on microfinance companies and appealed for the Bank of Ghana to reconsider the deadline for MFI’s increased minimum capital requirement in 2021. “We also appeal to the Bank of Ghana as we go into the new year, to reconsider the deadline for a minimum capital requirement increase, as COVID-19 has made it difficult to attract potential investors, local and foreign, into the microfinance space,” he said.
Yaw Sarpong, Head of the Other Financial Institutions Supervision Department (OFISD) at the BoG, advised members of GAMC to take advantage of the pandemic to review ways of doing business and pursue rapid transformation, especially in the areas of financial service delivery and customer relations.
Speaking on the AGM’s theme, ‘Positioning Microfinance Finance Companies to Sustain Financial Intermediation Through Disruptive Periods’, he urged them to “strive to promote sound corporate governance practices with competent, independent and responsible management to drive a strong microfinance system in the country” – as he believes poor corporate governance and weak risk management systems were some of the causes for the collapse of microfinance companies.
He however said that the BoG has introduced an Online Regulatory Analytics surveillance system to help manage data of licenced institutions – adding that the system will allow institutions to perform licencing and authorisation requests electronically.