Ghana's MFIs advocate dev’t fund, to help attract cheaper capital

To help attract cheaper capital from abroad, where investors have been held back by the relatively small size of Ghana’s microfinance institutions, government should consider setting up a development fund for the sector, Collins Amponsah-Mensah, Board Chairman of the Ghana Association of Microfinance Companies (GAMC), has said.   

Speaking to the B&FT at the fifth annual general meeting of the association in Accra, he said MFIs cannot continue to borrow at high interest rates for on-lending, and still be expected to alleviate poverty.

“If we want MFIs to grow and limit the challenges we are experiencing, government should consider setting up a microfinance development fund.

Once MFIs know that when we go to the MFI development fund, we can borrow at a cheaper rate and cannot lend beyond a particular percentage to the poor, then we can really alleviate the plight of the poor and deepen financial inclusion,” he said.

A GH¢20million seed capital to start with, he said, will not be a bad idea, aside which operators of the fund could look for cheaper funds from external sources to shore it up.

“When the fund is created then managers can then leverage on that fund to source for external funding because there are a lot of funds outside looking to invest in MFIs in Ghana, but because we are seen as too small, we cannot attract such funding.

Some of these external institutions cannot do less than US$5million but how many of our MFIs can take up US$5million? But when we have such a fund, then the external funds can be drawn in at cheaper rates…,” he said.

The association, Mr. Amponsah-Mensah said, has done some feasibility studies and is currently in talks with the Finance Ministry regarding the establishment of the development fund.

“To make it successful, there must be guidelines in accessing such a fund. You must be an institution that submits your returns to the BoG weekly and monthly; and you should have a well constituted board and certification programme for board members to go through.”

Mr. Amponsah-Mensah also appealed to the Central Bank to revisit the issue of permissible activities assigned to deposit-taking institutions because the current permissible activities are too restrictive and have contributed to the slow growth of the institutions.

“At least we should be allowed to offer mobile money in our capacity and also partner with other banks to offer other remittance services,” he said.

 As the umbrella body for Tier 2 non-bank financial institutions, GAMC has almost 700 members scattered across the country, with more than 50percent in the Greater Accra Region and 86percent, in total, located in urban areas.

Data from the Ghana MicroFinance Institutions Network (GHAMFIN), an umbrella body of all non-bank financial institutions, indicates that MFIs have created 6,465 jobs, whilst total industry assets stand at GH¢772.92million. Source:B&FT