News Column

BOG Warns Deceitful MFIs

August 19, 2014

Masahudu Kunateh

THE Bank of Ghana has warned microfinance institutions (MFIs) for constantly changing their names as a way of covering their tracks after they duped members of the public.

The Head of Other Financial Institutions Department of the Bank of Ghana, Raymond Amanfu, said the central bank would as part of measures to sanitise the sector also withdraw the operating permits of companies found to be engaged in areas outside the scope of their license, such as forex trading.

The bank would also clamp down on illegal transfers of microfinance licenses, he warned.

"Every day, I get at least five application from companies wanting to change their names. What is happening is that quite a number of them are actually messed up and want to clean up by changing their name.

"Henceforth, no company should apply to change its name. They must use the name on their license," Amanfu said.

Amanfu whose department supervises close to 500 microfinance companies, was speaking at the recent annual general meeting of the Ghana Association of microfinance companies.

More than 50 microfinance companies have collapsed since 2013 due to poor managerial skills, while some have been used as a conduit for the perpetration of fraud through Ponzi schemes that lure depositors with absurdly lucrative investment interest rates.

"Microfinance licenses are non-transferable. There are companies that transfer their licenses to other companies without recourse to the regulator.

"Henceforth, ownership-change has been suspended unless with prior approval," he said.

According to the regulator, quite a good number of companies are doing remarkably well and the announced measures are targeted at "kicking out the few bad ones that want to destroy the sector," said Amanfu.

Currently 447 microfinance institutions have been licensed to operate, of which 390 are microfinance companies, 50 are money- lending companies and seven are financial non-governmental organisations.

At the end of June 2014, total assets of the microfinance industry stood at GH¢768, 81million, representing about one percent of total assets in the banking industry.

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Source: AllAfrica

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