70 microfinance firms denied operating licence

The central bank has refused to approve the operating licence of 70 microfinance institutions and one money-lending company in the country. 

 

The affected institutions were unable to meet the mandatory requirements precedent to the issuance of a final licence, after exhausting their six-month “approval in principle” grace period.

According to the statement copied to the B&FT, the licence of these microfinance and money-lending companies were revoked after several reminders to get them to meet the mandatory requirements failed.

Cedar House Microfinance Services Ltd.; Ezi Access Microfinance Ltd.; Look-Ahead Microfinance Ltd.; Fast Money Microfinance Ltd.; and Kwabef Microfinance Ltd. are among the affected institutions.

Others are Quick Loans Microfinance Ltd.; Vanliz Microfinance Services Ltd.; Genesis Seed Microfinance Ltd.; Growth Champions Microfinance Ltd.; and the money-lender Growth Pole Money Lending Ltd.

“The Bank of Ghana wishes to inform all banks, non-bank financial institutions and the general public that the ‘approval in principle’ granted to the affected institutions is hereby revoked,” the statement read.

The central bank in the exercise of its power grants licences to persons who desire to conduct the business of banking, including microfinance and money-lending.

Applicants are usually granted a six-month “approval in principle” operating period within which to meet all operating requirements before the final licence is issued.

The move from the bank reaffirms its commitment to protect the investing public from the frequent lock-up of depositors’ funds and subsequent folding-up of some microfinance firms that fail to survive the stiff market environment.

Microfinance companies in the country are challenged by the issues of poor loan recovery resulting from granting credit to customers without proper credit appraisals, weak corporate governance structures, and inexperienced personnel.

To protect the interest of depositors and iron-out these limiting factors, the Bank of Ghana (BoG) in its supervisory role quadrupled the minimum capital requirement of microfinance companies and rural banks.

The central bank’s Head of Other Financial Services, Raymond Amanfu, explained to the B&FT that the directive was “to protect depositors, help the financial firms stay abreast with dynamics of the economy, and also make sure that the institutions have capacity to undertake the full extent of the business they are engaged in”.

source:B&FT