Bank of Ghana urged to lend to MFIs

Chief Executive Officer of Unicorn Happy Investment (UHI) -- a micro-finance institution, has urged the Bank of Ghana (BoG) to lend to registered micro-finance companies at lower rates to enable them on-lend at competitive rates to the micro, small and medium enterprises.

George Nkansah Afful argues the special dispensation would go a long way to further boost the micro, small and medium scale businesses in the country and create much-needed employment.

The central bank has already licenced over 340 microfinance companies, while close to 600 applications for licences are pending.

Regulating the high number of microfinance companies has been a tough challenge for the central bank, which recently created the Other Financial Institutions Supervisory Department to deal specifically with this rapidly-expanding financial sub-sector.

He said the microfinance industry is a high risk area and with its proliferation making it more challenging, as some continue to fold up, it would be prudent for banks, finance houses and BoG to intervene by creating affordable access to funds for microfinance to help reduce their lending rates.

Apart from concerns over their “outrageous” lending rates, microfinance companies have many times been a conduit for the perpetration of fraud through Ponzi schemes that lure depositors with absurdly lucrative investment interest rates.

The central bank in 2012 revised the regulatory capital requirement for MFIs to at least GH¢500,000 for companies with one branch, while additional branches are subject to further capitalisation.

Speaking at the fifth anniversary of UHI in Koforidua, Mr. Nkansah said: "It is very challenging to access funds from the open market, and when you do the cost thereof does not give you the luxury of relaxing your lending rates. This results in micro-finance being seen as charging relatively higher interest rates on loans".

According to him, the industry has its own internal difficulties which mainly have to do with clients defaulting; but he was confident that the micro-finance industry has come to stay and is augmenting government efforts of creating employment and individual empowerment.