Microfinance companies are seeking an extension of the deadline for their recapitalization. Microfinance companies have up to the end of February 2020 to raise 2 million cedis as their new minimum capital requirement.
However, the companies say the timing is too short as they are struggling to win investors due to low public confidence in the sector which was created by the Bank of Ghana’s financial sector clean-up exercise.
“It was announced in September and we are to meet it in February; we think that the timing is too short. Already the sector is going through challenges and it has not settled yet, so bringing in and giving that short timeline is not going to help,” Executive Secretary for the Ghana Microfinance Institution Association, Joseph Kwame Donkor told Citi Business News at the sidelines of the Association’s Annual General Meeting.
He disclosed that the association has sent a proposal to the Central Bank and the Finance Ministry to reconsider the deadline.
“We think that we need a bit of time for those who will be able to meet it, those who will downgrade, those who will merge and those who will be acquired. They will still need some time to be able to go through the process to be able to make a decision. So, we think that the time is short to be able to do that,” Mr. Donkor explained further.
BoG clean up
About 72 percent of microfinance companies making up of over 300 companies were closed down by the Bank of Ghana in May 2019 for various infractions.
Impact of the BoG clean-up
The remaining 147 companies are complaining that they are unable to get investors who are willing to invest money into their business for capitalisation and expansion purposes.
The companies are yet to regain the full trust of the public as most customers of the collapsed companies are yet to receive their deposits.
Meanwhile, the Bank of Ghana says the companies would have to work harder to increase public confidence in them.
In another development, Microfinance Companies are asking the Bank of Ghana to allow them to offer mobile money services. Currently, mobile money services are not part of the permissible activities of Microfinance institutions.
But the Ghana Association of Microfinance Institutions says members now have the capacity to run those services and so the regulator must allow them to do so.