Microfinance industry recapitalization will call for mergers – GAMC

The Ghana Association of Microfinance Companies (GAMC) has welcomed the Bank of Ghana’s directive for the recapitalization of the industry.

The BoG wants to quadruple the minimum capital requirement of microfinance institutions and rural banks. According to the directive, microfinance firms will have to increase the present capital of ₵100,000 to ₵2million by 2018.

National Chairman of GAMC, Collins Amponsah Mensah, says the additional capital injection should make the institutions stronger and improve their operations.

“Government wants them to increase their capital to make them stronger to be able to protect depositors’ funds and protect it very well, which we’re all looking up to,” he noted.

The GAMC Chair, however, has concerns about the ability of the companies to raise the capital as, he says, most of them are presently not making profit.

“I think that it’s going to help the institutions but as to how they are going to raise it [the capital] is another question,” he observed. The [microfinance] market is reserved for Ghanaians, so as it is, you can’t go for equity from outside and if you borrow, which is debt, it’s rather increasing your debt stock. But there is only one source that institutions can increase their capital, that is making more profit but these institutions are not making the profits that they expect,” said Mr. Amponsah Mensah.

 

The burst of the microfinance industry boom has left a good number of firms collapsing in the past couple of years. In the Ashanti region, only 58 of the over 150 firms are presently in operations.

Though Mr. Amponsah Mensah says there is stability in the industry, there are fears of further fold ups when the new capitalization takes effect.

The GAMC expects the industry regulator and the government to support the MFIs to capitalize whilst members are enjoined to explore strategies to survive.

“We are advising our members not to look at collapse but to look at consolidation; if ten of the institutions can come together and can raise that and become one institution stronger, it’s better than the individuals existing on their own and unable to raise the required capital,” stated Mr. Amponsah Mensah.

Story by Kofi Adu Domfeh