Who Controls Money Lenders?

Bertha Ansah-Djan, CEO of MASLOC

The Microfinance and Small Loans Centre (MASLOC) of the Office of the President has questioned the legitimacy of the Bank of Ghana's (BoG) mandate over its proposed supervision and regulation of money lenders in the country.

Ms Bertha Ansah-Djan, Chief Executive Officer of MASLOC, said at a stakeholder meeting organised by the BoG to present its

proposed guidelines for the sector that MASLOC was “a bit confused as to where the BoG is coming from” with regard to the supervision and regulation of lenders.

According to Ansah-Djan, MASLOC “unlends its funds to these institutions and by extension should be the one to regulate and supervise their activities to ensure optimal performance and subsequent refund of our funds”.

She said MASLOC’s policy document states among other things that the centre “is the apex body of microfinance institutions in the country” and should, therefore, regulate and supervise their activities.

But the Assistant Director of the Banking and Supervision Department of the BoG, Mr Franklin Belnye, said it was “the BoG’s duty to regulate the activities of these microfinance institutions”, adding that the BoG had “no doubt that what it is doing (framing up modalities towards regulating and supervising their activities in the coming months) is appropriate to our mandate”.

He, however, noted that the BoG might have to engage MASLOC on “a one-on-one discussion on the matter', adding that nothing stopped MASLOC from supervising their activities, once it was the body that unlent to most of them.

'But when it comes to regulation, it is the BoG that should do that,” Mr Belnye said.

According to him, the BoG had actually dedicated a unit within the bank tasked with the responsibility of regulating the microfinance sector should the measures being formulated be finalised.

The MASLOC CEO later told the GRAPHIC BUSINESS that MASLOC would be pushing for the mandate from the BoG to enable it to monitor and supervise the activities of the microfinance institutions while the Central Bank concentrated on the issuance of regulations to guide the sector.

“MASLOC would want the BoG to regulate the sector; come up with the appropriate guidelines on what it takes to be a microfinance institution in Ghana. But when it comes to monitoring of their operations and all other things, leave it to the various associations (money lenders association, MASLOC and the rest) to handle”, she said.

According to Madam Ansah-Djan, MASLOC would be pushing for what 'our policy document mandate’s us to be; the apex body of microfinance institutions in the country and subsequently supervise their activities”.

The Bank of Ghana had earlier admitted that continued licensing by the Criminal Investigations Department (CID) of the Ghana Police Service of money lenders in the country was illegal but added that its (BoG’s) lack of the needed structures to regulate the sector had caused it to “turn a blind eye on” the CID’s activities.

Although the CID did not claim authority over the licensing of the money lenders, it said its continuous licensing of the lenders was “to fill a void” created by the BoG’s unavailable modalities to license the lenders.

Money lenders, microfinance institutions and ‘susu’ collectors are, meanwhile, beginning to heave a sigh of relief following the Central Bank’s renewed efforts towards taking over full licensing, supervision and regulation of their activities.

In a document titled “Guidelines for Regulating Microfinance Institutions in Ghana”, the BoG said it was mandated to protect 'innocent patrons of microfinance institutions from loss of their hard-earned savings while recognising the role of mini-savings and loans companies, as well as credit providers, in ensuring an all inclusive financial and orderly development of the country’s credit delivery system'.

In line with these intentions, the regulator of the country's financial sector said the regulations captured in the said document were meant “to provide for the orderly development of the microfinance sector, pending the passage of a Microfinance Act in the near future'. The said draft document categorised microfinance operations into two tiers, two and three.

Tier two institutions, it said, would include “Susu companies, financial NGOs, money lenders and other companies engaged in “financial services” and must be wholly owned by nationals”.

These companies, it added, must have a minimum capital base of GH¢100,000, accept deposits not exceeding GH¢10,000 per customer per transaction and have their licences renewed annually with a revisable fee of GH¢200.

Those of tier three would comprise individual susu collectors mandated by the BoG's regulatory framework to belong to 'an association such as the Susu Collectors Association, with those associations belonging to tier three institutions”. The minimum capital requirement of tier three institutions according to the document, would be GH¢10,000 for starters.

The BoG’s Banking and Supervision Department is currently hoping to have those modalities and regulations adopted and passed by its board, hopefully this month, to enable its take in licensing, regulating and supervising the activities of microfinance institutions in the country.

And once that is done, the BoG said 'All persons and institutions involved in microfinance operations will be given a maximum period of six months from the date of publication of a notice to comply with the contents of this guideline or cease operations.'

Some of the representatives at the meeting were of the view that the BoG regulating their activities would help categorise the various microfinance institutions into their respective divisions.