The Bank of Ghana (BoG) will begin a clean-up of the microfinance sector by the second quarter of this year, the Governor, Dr Ernest Addison has said.
The move, he said, was to build a strong and vibrant microfinance sector and protect the investments of depositors in the sector.
Dr Addison who is the Chairman of the Monetary Policy Committee (MPC) of the BoG disclosed this at a press confab after the 87th regular meeting of the MPC said the clean-up of the microfinance sector was estimated to cost the country GH¢700 million.
He explained that the BoG in consultation with the Ministry of Finance had almost secured the financial resources for the clean-up of the microfinance industry.
Currently, there are more than 319 licensed microfinance companies across the country.
The microfinance industry is going through financial difficulties with some unable to fulfill their financial obligations when they fell due, thus putting their depositors at risk.
Some of the factors which had brought about the challenges facing the microfinance sector include poor corporate governance, mismanagement, poor credit risk controls, and high interest rate they charge customers on loans, thus making borrowers unable to pay back their loans.
Dr Addison did not provide much information on the exercise, but said that the BoG was in discussion with the Ministry of Finance (MOF) on the modalities of the exercise.
“We are yet to agree on the exact date to begin the exercise,” he said, adding that “hopefully the exercise will be done in the second quarter this year.”
He said the BoG would give detailed information on the exercise when it completes discussions with the MoF and the modalities for the exercise.
A banking consultant, Nana Otuo Acheampong in an interview with the Ghanaian Times lauded the BoG for the move to clean up the microfinance sector.
He said though the challenges being faced by the microfinance sector could not have any major impact on the economy, there was the need to clean up the sector.
An economic analyst with Databank, Courage Boti for his part said the “clean-up” was long overdue, saying it is a move “in the right direction.”
He said the clean-up would ensure the growth of the sector to contribute to the economic development of the country.
“The clean-up of the microfinance industry by the BoG will ensure proper regulation, adherence to good corporate governance practices, and good credit control practices,” Mr Boti said.
By Kingsley Asare