[ 2016-03-11 ]

Wampah reiterates cap on MFIs
Governor of the central bank, Henry Kofi Wampah,
has said that the bank has learnt its lessons and
will “slow down” on licencing Micro Finance
Companies in view of the rising cases of fraud.

The governor agrees that it is too large a number
for the country to have some 500 microfinance
companies, saying: “So we have taken a decision
to slow down on the numbers”.

He assured parliamentarians who summoned him to
respond to the upheavals in the sector that the
central bank will work with an umbrella-body of
the MFIs to tighten regulation of the
sector.“There is an association called the Ghana
Association of Microfinance Institutions. We are
working with them and I think we will strengthen
them more. It is an umbrella-body that can work
like the Apex bank, so we will continue to work
with them and achieve that,” he said.Finance
Committee members of Parliament James Avedzie and
Anthony Osei Akoto had enquired from the governor
whether the central bank will partner the Apex
bank to supervise the MFIs.He equally admitted
that the central bank’s decision to raise the
minimum capital requirement for the sector has not
fully succeeded in curbing the large numbers.A
directive by the BoG asked MFIs -- which presently
require GH¢100,000 to operate -- to ramp-up their
core capital to GH¢2million by 2018; while rural
banks that now need GH¢150,000 to operate are to
gradually meet a new capital requirement of
GH¢1million by the end of December 2016.“We try
as much as possible to not have a non-tariff
barrier. So the barrier would be the capital that
is needed, which may reduce the numbers but
appears not to be working well. So we have learnt
from our lessons and we have slowed down on the
numbers,” he assured the parliamentarians.Asked
about the possibility of reducing the numbers
further, the governor said: “Many of them have
started taking deposits already, so the problem
will arise again if we don’t manage the
situation properly. We can’t just go there and
close them down. So we rather try to work with
them to reduce the risks that are involved going
forward”.The central bank’s Head of Other
Financial Services, Raymond Amanfu, explained to
B&FT that the latest directive requiring
microfinance firms to increase their stated
minimum capital progressively over the next three
years, and that of rural banks over the next two
years, is to protect depositors.It is also meant
for the BoG to stay abreast with dynamics of the
economy and also make sure these institutions have
capacity to undertake the full extent of business
they are engaged in, he noted.“Looking at the
dynamics -- which include the economy, the size of
the microfinance institutions (MFIs) and the
nature of the business they are doing, and the
fact that their capital is continuously eroded by
their activities and size of the loans they give
-- these MFIs need to cushion themselves. That is
why we extended the capital and deadline,” he
said.Wampah also proposed an increase in the
amount to be paid to depositors who lose their
investments to financial institutions under the
Deposit Protection bill.The figures, he said, must
be reviewed upward; and hence he pleaded with MPs
to expedite action on passage of the bill.‘‘We
have two bills with you. One is the Specialised
Deposits bill and the other is the Deposits
Protection bill. These two bills are with you and
we believe you will look at them quickly. We are
hoping they be looked at before the end of
March,’’ Dr. Wampah added.

Source - B&FT

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