289 Microfinance Firms To Fold Up
At least 289 microfinance companies are likely to be out of business if the Bank of Ghana does not extend the deadline for the new minimum capital requirement for players within that space.
All microfinance firms are expected to increase their capital from Gh¢500, 000 to Gh¢ 2 million by June 2018.
The move is to build a robust microfinance sector.
According to the Ghana Microfinance Institutions Network (GHAMFIN), just about 30 out of the 319 microfinance companies are in good standing.
“We are still anticipating that by June most of them will be able to meet the minimum capital; if they haven’t met it, then we are anticipating that the central bank will ask them to merge or move down the tier,” the Executive Director of GHAMFIN, Yaw Gyamfi told Starr Business’ Osei Owusu Amankwaah.
GHAMFIN has also sent a proposal to the Central Bank seeking audience with the governor for an extension of the deadline to 2022.
“We have sent a full proposal, titled; ‘The proposal to strengthen the development of the microfinance industry in Ghana’ and we made some recommendations, one of which is the extension of the deadline to 2022.”
Their concern comes on the back challenges by some 17 local banks struggling to meet the Gh¢400 million minimum capital by the end of the year.
GHAMFIN is contemplating adding their voice to calls on the President to push the Bank of Ghana to extend the Deadline.
Meanwhile, some economists believe the economy for the SMEs will be in danger if government does not do anything to address their concerns because almost all the financial institution in distress are SME focused.
An economist with the University of Ghana, Adu Owusu Sarkodie wants the Central Bank to check the timing and make it a bit flexible for microfinance companies and local banks.
“Both institutions – the commercial banks and microfinance institutions – are playing the role of giving credit to the customers when needed.
The commercial banks are supposed to concentrate on projects that require huge capital; like constructing a road, constructing a bridge while microfinance institutions should look at the micro needs of the economy,” he said.
Implications for SMEs
The SME sector will be the most affected positively or negatively by the development because most of them are not able to stand the rigorous demands of commercial banks, therefore resort to microfinance companies to inject capital into their operation. As a result many of them save with Microfinance companies.
However, the National Welfare Officer for Ghana Union of Traders Association (GUTA), Benjamin Yeboah is of the view that, it is better to have a few strong Microfinance companies supporting SMEs than several weak once bolting with their savings.
“We have had many cases and still dealing with microfinance firms who run away with our hard earned money. It will be challenging from the beginning but at the end we will have strong companies to support us. We urge our members not to panic but believe the development is in the good for all of us,” Mr. Yeboah said.