The
burst of the once bubbling industry left most clients losing their savings and
investments as some workers also lost their jobs.
“I
wouldn’t say the storm is over but it is settling and so it calls for a lot of
work, attention and also caution,” stated Collins Amponsah-Mensah, National
Chairman of the Ghana Association of Microfinance Companies (GAMC).
A
study conducted by the Association indicates most operators failed to apply the
principles of financial intermediation.
“Some
will take money from the public and instead of lending it, they thought it was
risky and so invested in other ventures without taking into consideration
maturity, and so in some cases you see [firms] borrowing short term and then
investing long term in other projects that had gestations that were long term,”
observed Mr. Amponsah-Mensah.
This,
he noted, created liquidity gaps which rendered some firms unable to honor
payment of funds to depositors upon maturity.
Rising
cost of operations without corresponding increase in revenue base also affected
the microfinance companies’ ability to stay in business.
The
GAMC Chair added that effective regulation and supervision of the sector was
also a factor for the burst – as some firms attempted to beat restrictions on
multi-branching.
“But
now since the regulation requires that you have an active Board. We are
encouraging members to make sure that they have their Boards in place – people
who can help them to drive the process,” said Mr. Amponsah-Mensah.
One
of the major hurdles to overcome is restoring public confidence in the industry.
A
number of traders and account holders lost their savings during the distress
period. “It is very difficult for us to trust them again,” said an aggrieved trader
at the Kumasi Central Market.
Mr.
Amponsah-Mensah has acknowledged a lot of things went wrong because of
inexperience. He however says the industry is turning over a new leaf as
managers and other staff are exposed to new knowledge in banking and
microfinance.
“Anytime
there is a storm, then the ground also becomes slippery when the storm is over;
so it has to be managed. We are managing this through education, sharing
experience of the past and then seeing how we mitigate some of the things that
we could have managed before 2013,” he said.
He
has appealed to the public to build trust and confidence in the companies
because “for the 70% that is unbanked, it’s the microfinance companies that can
provide financial services to them.”
The
GAMC also wants the government to create a Microfinance Fund to support for the
sector to surmount its liquidity challenges.
Story
by Kofi Adu Domfeh
Listen to audio link...
No comments:
Post a Comment