DKM Diamond Microfinance Company Limited invested GHS77 million of investors' deposits into personal businesses and subsidiaries belonging to the firm's managers, Finance Minister Seth Terkper has told Parliament on Tuesday February 23, 2016.
The action by the managers of the firm breached the Bank of Ghana's regulations concerning the operations of microfinance companies, a situation that forced the Central Bank to close down the firm.
DKM, according to classfmonline.com's investigations, had GHS10.7 million in its vault as of the time the Central Bank closed it down.
Subsequently, the Central Bank gave DKM a month to raise GHS50 million in addition to the GHS10.7 million the firm had in its vault, so it could be cleared to resume operations and pay its investors their due principals and accrued interests.
DKM, however, was unable to do so, despite an extension of the grace period accorded it by the Central Bank.
The inability of DKM to raise the additional funds was the main hurdle, which prevented it from getting clearance from the Bank of Ghana to reimburse its depositors, thus leading to a lock-up of several millions of Ghana cedis of investors’ money.
The CEO of DKM was arrested by the BNI, at a point in time, over the matter but was later granted bail. He was sued by one client and put on remand for a while, but, again granted bail. Hundreds of clients affected by the microfinance debacle in the Brong Ahafo Region, have held several demonstrations and since the middle of last year when the scandal broke, in an attempt to retrieve their investment.
Speaking at a press conference in Accra on Friday January 8, Deputy Governor of the Bank of Ghana, Mr Milicen Narh said: "DKM Diamond Microfinance Company ltd had been misreporting to the Bank of Ghana and had not been keeping accurate and reliable records of all transactions in its books, thereby violating section 53 and section 71 of Acts 673 as amended. DKM Diamond Microfinance Company ltd was overexposed to its affiliates in violation of sections 41 (1) and (2) of Act 673 as amended."
Apart from DKM, several other microfinance firms in the Brong Ahafo Region are caught in the same debacle. Minority MPs, who hail from the region recently held a press conference and urged the President to intervene in the matter.
The Bank of Ghana also closed down 70 microfinance firms recently.
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