Venture capitalist calls on MFI, stakeholders to help reform industry
Adnan Adams Mohammed
A venture capitalist
has called on the stakeholders within the Microfinance Financial Institutions
(MFIs) to collectively help to reform the industry to protect depositors funds
and also sustain businesses.
The Chief Executive
Officer of Quick Angels and Quick Credit, Richard Nii Armah Quaye has proposed
that, the remaining Microfinance and Microcredit must stop taking deposits from
customers, raise equity and provide loans over a period of time to bring back
confidence into the sector.“ … And they must learn to be disciplined and learn
how to use depositors’ money”.
Many Ghanaian have
their investment and deposits with savings and loans companies; if the
well-structured and well-regulated institutions are not able to give them their
funds can you vouch for a Microfinance company, Mr. Quaye he said. “The
industry as I speak with you is virtually dead. The few that is left must
change their structure; they must change their module.”
Bank of Ghana, forth
night ago, announced that the licenses of 386 financial firms in the
Microfinance and Microcredit space have been breached due to regulatory
infractions. After the revocation of the licenses, 137 firms remain operational
in the Microfinance sector while 31 firms remain in the Microcredit sector.The
move is part of a cleanup of the sector which is estimated to cost the country
some GHC7.0billion. The Central Bank has however, outlined a number measures to
save the industry.
“The Bank of Ghana is
undertaking a comprehensive review of licencing and supervisory policies and
directives; reviewing the minimum capital requirements for microfinance
companies; and encouraging possible consolidation through voluntary mergers and
acquisitions,” the regulator stated in a press release issued last week.
Consequently, Prof.
Peter Quartey, an economics professor at the University of Ghana in a comment
has said, the BoG’s intention to increase the minimum capital requirement is
long overdue. Adding that, the delay in raising the minimum capital requirement
led to the springing up of many microfinance companies which do not have the
capacity to compete in the industry.
“I think it is
something that is long overdue because the MFIs are also means of banking, and
banking is serious business; you need some liquidity to cushion yourself. You
should have some money to fall on quickly so that people don’t lose confidence
in your operations. But where you have a very thin capital-base, then it
becomes a problem.
“So, I think the
industry should have a decent minimum capital to operate. When that happens,
this mushrooming of microfinance will reduce so that those who really have the
capital to do this business will remain in it,” he told an Accra based media
during an interview.
This, Prof. Quartey
said, is the right time for such an action to be taken, saying it will restore
lost of confidence -despite it having some repercussions on the economy and
livelihoods of the people.
“It is the right time
for this to happen. There is an interconnectivity between the MFIs and the
banking sector, so you can’t reform only the banking sector and leave the
other. Initially, it will bring some pain in the form of lost jobs and
frustrations in retrieving deposits – and thereby creating inconvenience to
customers; but in the long run it will restore some confidence in the system,”
he said.
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