BoG Lacks Capacity To Regulate MFIs - UT BOSS

Regulator of banks and financial institutions in the country, the Bank of Ghana (BoG) does not have the resources to effectively regulate microfinance institutions, Chief Executive Officer (CEO) of UT Holdings, Mr Prince Kofi Amoabeng has stated. According to him, “they don’t have what it takes to oversee the activities of the institutions.” “Bank of Ghana needs more capacity as in trained personnel, offices, supervision and other logistics to effectively regulate banks and microfinance companies,” he told The Finder in an exclusive interview. Even banks now number 27 apart from other non-bank financial institutions such as leasing and mortgage companies, savings and loans, which the regulator has to deal with. Mr Amoabeng maintains that BoG is clear on its functions but lacks the capacity to carry out its regulatory functions properly. “With time, regulation has become more challenging for the central bank because from the days of Unique Trust, we were regulated by BoG consistently and we grew slowly but surely,” he recalled. If you are regulated well it doesn’t matter the capital because the capital requirement those days was GH˘10,000 and from that capital we were able to build consistently from a local institution into a fully fledged bank. MFIs provide financial services for entrepreneurs and small-scale businesses. Several cases in which customers of microfinance companies have lost their monies and investments have reached the regulator but the seemingly powerless BoG has only advised customer caution in dealing with the mushrooming companies. The illegal activities of some microfinance companies in the past are reportedly affecting the services of most rural banks. The regulator on countless occasions have been called upon to investigate and know the financial background of microfinance companies before issuing them with licenses to operate. This will enable the BoG to identify those companies that could function when granted the license. President of the Ghana Union of Traders Association (GUTA), Mr George Ofori is one of those people who see the microfinance institutions as a curse, accusing them of killing businesses in Ghana. According to Mr Ofori, the high interest rates charged by the MFIs on the loans that they give out to their clients go a long way to cripple businesses. “Assuming they (microfinance) are charging about 5% per month, 6% per month or 7% per month, cumulatively you are talking about 60% in a year if you are talking about 5%. If you are talking about 6% you are talking about 72% and 7% is 84% in a year, compare that to the commercial banks who charge about 30% in a year. Which is cheaper?” he quizzed. According to Mr Ofori, there is no business that makes a lot of profit to pay for such a high rate of interest charged by the microfinance institutions and still make an impact on their jobs. According to the Ghana Association of Microfinance Companies (GAMC), there are over 3,000 microfinance companies operating in Ghana, majority of which are working without licences. The association sympathises with the BoG, admitting that what has made the bank’s regulatory work more difficult is the fact that many of the companies commenced operations before the laws were made to regulate them. Total registered membership of GAMC stands at 619.