Over the past five years, the country’s microfinance sector has been under severe stress, owing to the collapse of some Microfinance institutions in the Brong Ahafo and Northern Regions. Similar closures happened in the Volta and Greater Accra Regions.
There have been several reports of MFIs closing down and running away with clients’ monies, corporate governance challenges, promises of too-high returns on deposits, and lack of qualified personnel running some MFIs.
This state of affairs has brought untold hardship to a number of depositors and clients in general who saved with these distressed institutions.
We believe these unfortunate depositors who were affected are still awaiting relief in the form of recompense or some form of reimbursement, but remain in limbo as to when they will be compensated.
The central bank, last year, placed a freeze on the licencing new institutions in order to properly scrutinise existing ones, and the release of this new list is expected to show customers which institutions can be trusted. This is a welcome development, as it shows the seriousness the central bank attaches to depositors’ funds.
Together with government, the Bank is working on a comprehensive reform programme to address challenges in the sector and strengthen regulatory and supervisory oversight, the BoG has stated in a release – and we believe this long overdue, because if the central bank had played its oversight and regulatory functions well, probably this whole furore would never have taken place.
However, as the saying goes, ‘better late than never’; and it is indeed gratifying that the central bank is instituting reforms so that the occurrence of such a major catastrophe in the microfinance sector does not happen again.
While strenuous efforts are being made to rope more people into the formal economy and get more to save with financial institutions, we ought to ensure that when they do so they will not face the risk that some unfortunate depositors had to face when the scandal broke.
This paper believes once these reforms have been undertaken to the letter, it will again restore the much-needed confidence in the microfinance sector and get large numbers in the informal economy to have trust in these financial institutions and save their hard-earned monies.
This idea of promising fantastic interest rates to depositors that cannot be supported by any positive action must be a thing of the past, since the industry cannot be run by charlatans.
