The
Bank of Ghana made no mistake in licensing microfinance companies to operate in
Ghana’s financial service space, says the Ghana Association of Microfinance
Companies (GAMC).
Members
are not enthused at recent comments by Managing Director of HFC Bank, Asare
Akoffo, that the licensing of microfinance companies was a ‘mistake’, as he alluded
to operational challenges within the microfinance sub-sector.
According
to Mr. Akuffo, the regulator could have been more prudent in its decision by restricting
microfinance authorization to traditional financial institutions such as the universal
banks, savings and loans companies and rural banks.
National
Chairman of the GAMC, Collins Amponsah-Mensah describes the comment as ‘unfortunate’,
stating that the financial space of Ghana is still ‘virgin’ with high number of
unbanked population.
“What
are we fighting for?” he queried. “Microfinance is more of a social activity
first before profit and every business person would want to access the profitability
first before they go in; so for a lot of the banks it’s not an attractive area…
so I think that Bank of Ghana didn’t make any mistake coming out with the
regulation.”
Mr.
Amponsah-Mensah says it behooves on industry players to ensure the sector
develops in the interest of businesses and individuals at the micro level of
the economy.
“If
there are challenges, let us all propound solutions to it so that we can work
together as a team and ensure that nobody is left out of the financial service
space because you’ll grant a loan to a corporate entity to do business, I will
grant a loan to a petty trader because the person also needs it to do business.
At the end of the day, we all contribute to the economic performance of the
country,” he opined.
The
microfinance companies in the northern sector of Ghana have been taking stock
of their performance in 2013.
They
admit last year was a turbulent year for the financial sub-sector, with a good
number of them going into liquidity challenges and others folding up, whilst
clients of such firms lost money within the period.
According
to the microfinance institutions, most of the challenges were self-inflicted,
especially on the issue multi-branching which Franklin Belnye, BoG’s Head of
Banking Supervision has described as “visibility not being viable”.
The
MFIs failed to apply best practices in operations, whilst the Association could
not adequately instill discipline in members, observed Mr. Amponsah Mensah.
He
however believes the storm of distress and panic withdrawal is over, stating
that 2014 looks favourable for the microfinance sub-sector.
“In
the years ahead, people are going to be very careful in the way they do this
business,” he said. “In the past, most of us felt that growing in numbers was
equivalent to growing in branches and so there was that competition to just
expand by opening branches here and there, but from what we went through last
year, the lessons we’ve learnt is that growth doesn’t mean having several
branches; you can stay in one branch and still grow.”
The
industry regulator has licensed over 400 firms since the new regulation came
into force.
Mr.
Amponsah-Mensah expects the Bank of Ghana push a lot more attention to
supervision to instill discipline in the industry.
“Let’s
put in proper supervisory structures; let’s engage the Association, let’s
charge them with some of the responsibilities so that they can also play a role
to support with the supervision,” he suggested.
Story
by Kofi Adu Domfeh