The Bank of Ghana has notified the public of closure of 347 microfinance companies across the country, citing various reasons which include undercapitalization, corporate governance breaches, non-compliance, poor lending and investment practices leading to inordinate losses, diversion of customer deposits into private businesses, among others.
The Bank of Ghana said the revocation of the licences of these institutions is to get rid of insolvent and dormant institutions that have no reasonable prospects of rehabilitation and have denied depositors access to their deposits, thereby constituting a threat to the stability of the financial system.
To ensure that the possibility of this happening again is reduced, the Bank of Ghana has signaled that it will increase the minimum capital requirement for microfinance companies.
The Bank of Ghana says it will further introduce proportional corporate governance; fit and proper; and risk management directives; embark on strict supervision of licensed institutions and enforce relevant regulatory requirements; and increase the resources available for effective supervision of licensed microfinance companies.
The total number of the companies which have had their licences revoked comprises of 155 insolvent institutions that have already ceased operations, and 192 other insolvent ones. In addition, the licences of 39 microcredit companies (also known as money lenders) have been revoked, comprising 10 of such companies that are insolvent and have ceased operations, as well as 29 other insolvent ones. This leaves the industry with just a third (137) of its previous total number of 484 companies.
We want Green Views tenants to take note of this announcement and exercise discretion and much caution in their future dealings with any financial institution. It is advised that before dealing with any bank or other financial institution, visit the Bank of Ghana website to check whether that company is in good standing.