The
National Board Chairman of the Ghana
Association of Microfinance Companies (GAMC), Mr. Collins Amponsah Mensah, has
described as welcoming the latest decision by the Bank of Ghana (BoG) to revise
the minimum paid-up capital of microfinance institutions (MFIs), but insists there
should be a clearly cut-out plan to assist MFIs to raise capital, henceforth.
He
said the move by the Central Bank, to increase the core capital of microfinance
institutions, will contribute to enhance the operations of MFIs and further
strengthen them to protect depositors’ funds, as expected.
However,
he observed that although the directive is going to help those in the industry,
how microfinance institutions would raise this money remains the headache.
He
said “as a country we have to look at institutionalizing structures that make
it easier for these institutions to be able to raise the needed capital.”
His
comment follows a notice by the Bank of Ghana to rural and community banks
(RCBs) and microfinance institutions (MFIs) to adjust their minimum capital
requirement for the industry applicable to both existing and new entrants, in
accordance with Section 6 (2) of the Banking Act, 2004, Act 673, and Section 11
of the Non-Bank Financial Institutions Act, 2008, Act 774.
The
notice post that microfinance institutions, both Deposit Taking and Non-Deposit
Taking, which hitherto required GH₵100,000.00 to operate, are expected to raise
their minimum paid-up capital to GH₵2,000,000.00 representing a 1,900 percent
increase, within the next three years.
RCBs
on other hand, are to gradually meet a new capital requirement of GH₵1,000,000.00,
from a previous GH₵150,000.00, representing about 566.67 percent increase, by
31st December 2017.
The
directive, further notes that, MFIs which have been granted provisional
approval by the Bank of Ghana, shall comply with a minimum paid-up capital
requirement of GH₵500,000.00 and submit a credible capital plan to raise the
minimum paid-up capital to GH₵2,000,000.00 in accordance with the transitional arrangements,
set out in the notice; while new applicants and those yet to secure provisional
approval will have to with immediate effect meet the full capital requirement.
Sadly,
the fortunes of the once budding microfinance industry has declined drastically
due to the loss in confidence of depositors, as result of the unprecedented collapse
of many microfinance institutions in the country leading to the seeming unattractiveness
of the industry, over the last three years.
He
said “the market is reserved for Ghanaians, so as it is one can’t go for equity
from outside,” and observed that going ahead to borrow, which is debt, to
augment one’s capital base would rather increase one’s debt stock as opposed to
increasing equity.
Mr.
Amponsah Mensah, made these pronouncements in an interview with the media, said
at the moment, the only means by which MFIs can add to their capital is by
making more profit, but conceded that, the present state of the industry does
not make it easy for many MFIs to attain their targets.
It
was in view this that he asked that measures are instituted to help in
capitalizing these institutions, given that the market is reserved for only
locals.
He
appealed to MFIs in the country to consider mergers; nine or ten institutions
coming together to become one, in order that they can raise the required
capital, as opposed to operating individually without the financial muscle to
meet the latest requirement.
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