Microfinance companies see deposits decline by GH¢57m

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Lambert Osei, Board Chairman-Association of Microfinance Companies
Lambert Osei, Board Chairman-Association of Microfinance Companies

Microfinance companies are feeling the stress of COVID-19 on their operations, as data from the industry’s associations show that deposits/savings dropped by GH¢57million between February and April, 2020.

A recent survey, conducted by the Ghana Association of Microfinance Companies (GAMC) and the Network of Microfinance Institutions in Ghana, has shown that the sector’s savings dropped from GH¢1,116,992,304 at the end of February, 2020 to GH¢1,060,524,561 by April 15, 2020.

Lambert Osei Kofi, Board Chairman of GAMC, speaking at a webinar organised by Krif Media on the theme ‘Effects of COVID-19 on the Microfinance Industry in Ghana’, noted that by the end of 2019 most of the surviving MFIs after the BoG clean-up exercise started showing signs of recovery by way of increasing profitability, increased deposits, better liquidity positions and decreasing NPLs among others – but onset of the pandemic has erased almost all the gains.

He emphasised that the adverse impacts of the pandemic have made it impossible for saving clients, especially those operating in the informal sector, to work fully and therefore unable to save adequately.

“Decline in value of savings due to withdrawals puts pressure on MFCs to make funds available to depositors. Some institutions are compelled to take on additional borrowings at higher cost to meet the withdrawal requests, and others may have general liquidity constraints.

“Social distancing protocols will continue to impact savings collections, especially for those using the susu methodology – given that over 70% of clients are reached through face-to-face channels for mobilising deposits,” he said.

The association is recommending, among others, that its members invest in digital platforms to reach existing and potential customers; use savings management means to promote existing savings products that are responsive to emergencies; and provide incentives for savings clients to retain savings. It is also pleading with government to channel part of its bail-out to MSMEs through MFCs.

Managing Director-SIC Life Savings & Loans, Amma Frimpomaa Dwumah who also spoke at the webinar, added that the COVID-19 pandemic has increased the cost of doing business due to its health and safety protocol demands.

“These protocols require the purchase and use of certain consumable items like liquid soaps, paper towels, hand sanitisers and other detergents in some unprecedented quantities. It also requires the installation of automated dispensers and the use of thermometer guns that were not needed before the pandemic broke,” she said.

In addition, she narrated that the pandemic has affected the loan portfolio of MFCs in two ways: decreasing the rate of growth, and clients having to reschedule payment plans for their loans on the back of low business activities.

Ms. Dwumah reiterated that recapitalisation efforts are not yielding the results anticipated before the pandemic, as it appears all the capital sources are also being very cautious to avoid unnecessary risk to their investment portfolio.

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