The Ghana Association of Microfinance Companies (GAMC) has rejected claims By President Mahama that microfinance finance companies are not allowed to take deposits from the general public. According to the GAMC the regulatory framework establishing microfinance companies allow for the companies operating within the sector to accept deposit and make loans to its customers.
The association’s comment comes after President Mahama in giving an update on government’s intervention on retrieving depositors funds from DKM for its customers said microfinance companies are not allowed to take deposits.
President Mahama addressing journalists at the flagstaff house on Tuesday said ‘the microfinance companies have not operated within the guidelines that govern them by the Bank of Ghana and I believe that in this sense the bank of Ghana needs to improve its banking supervision because there have been an absolute explosion of the numbers when it comes to these institutions.
Now from my understanding they are not suppose to take deposits, they are suppose to give credit and they make an interest on the credit or loans they give and that is how they expand their capital, so microfinance institutions are different from savings and loans but most of these microfinance companies have started taking deposits which they is bad.
And there is another category that are not licensed at all they call themselves social clubs and when you contact them that they are breaking the law they will challenge you and say no but they open offices and start promising people all kind of unrealistic interest rates which brings to two the group of institutions which are defrauding the unsuspecting public’, President John Mahama said. But the National Board Chairman of the Ghana Association of Microfinance Companies Collins Amponsah Mensah in an interview with Citi Business News said the President’s statement was causing problems within the industry called for calm and asked the general public to ignore what the President said and refer to Bank of Ghana if they have any doubts.
“I think maybe it was a slip because when you look at the regulations the tier two institutions which are also microfinance institutions who are specifically referred to as microfinance companies are allowed to take deposits and also grant loans or credit to the public.
They are suppose to maintain a 20% primary reserve and a 10% primary reserve as per the regulation but the confusion is what microfinance is because for now we are even considering clubs and society, referring to them as microfinance companies when they are not, if we put all of them under the right category we will appreciate which of them are microfinance and ones that are not as it will show those allowed to take deposits and those who are not”. He adds that ‘I believe that the President made that statement in reference to the clubs and the societies with the cooperatives that are companies defined as the new form of microfinance that we have to look at which are not even regulated causing the major problems we see in the sector.
All those within the tier two are regulated and are allowed as per the Bank of Ghana regulation governing them to take deposits and grant credit as I stated earlier, National Board chairman of the Ghana Association of Microfinance Companies Collins Amponsah Mensah intimated. Citi Business News checks on the operating rules and guidelines for microfinance institutions (NOTICE NO. BG/GOV/SEC/2011/04) indicates – Non Permissible Activities for Tier 2 institutions- shall not undertake the following: issue checking accounts; engage in foreign exchange business; and engage in any trading activities or hold any stocks of goods for sale to their clients but are allowed to take deposits and grants loans to the general public. – By: Norvan Acquah – Hayford/citifmonline.com/Ghana –
