The closure of some 347 insolvent microfinance companies by the Bank of Ghana (BoG) will have very little impact, if any, on local industries, the Association of Ghana Industries (AGI), has said.
The AGI argued that the prohibitive interest rates at the microfinance level make it nearly impossible for industries to obtain credit at that level, and hence it does not expect the ongoing crisis to have any real bearing on the operations of local producers.
“It does not work for us. So, I don’t think that the closure of the microfinances is going to affect most industries. Mostly, yes, it will affect the traders but not the manufacturers,” AGI’s President, Dr. Yaw Adu Gyamfi, told the B&FT – adding that as a producer, if you borrow money from them, at the end of it your cost of production will be higher.
Since the microfinance firms’ closure, most analysts have expressed fear that it could further compound the credit-crunch situation faced by businesses in the country.
However, Dr. Gyamfi who spoke on the sidelines of the AGI Industries and Quality Awards 2019 launch in Accra, reiterated that he does not foresee the crisis having an effect on local producers, since borrowing from microfinances to finance productivity is not a wise option for manufacturers.
His comments come after last month’s closure of some 347 microfinance companies by the BoG.
A statement issued by BoG said the decision to close down the companies was taken pursuant to section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), which requires the BoG to revoke the licences of a bank or Specialised Deposit-taking Institution (SDI) when it determines that institution is insolvent or likely to become insolvent within the next 60 days.
Consequently, the BoG appointed Eric Nipah as Receiver for the specified institutions in line with section 123 (2) of Act 930.
“The revocation of these institutions’ licences is to get rid of insolvent and dormant institutions that have no reasonable prospects of rehabilitation and have denied depositors access to their deposits, thereby constituting a threat to stability of the financial system. By the revocation of these licences, the Bank of Ghana seeks to protect the financial system’s stability and to protect affected depositors,” the BoG said in a statement last month.