Fun clubs causing mess in microfinance sector: GAMC

The National Chairman of the Ghana Association of Microfinance Companies (GAMC), Mr Collins Amponsah-Mensah, has said the brouhaha surrounding the microfinance sector can be attributed largely to member-owned institutions and not microfinance institutions.

These member-owned institutions, he said, were voluntary institutions whose members pool their resources and give out to each other as loans, but were being classified as microfinance institutions.

In an interview on January 13, 2016 Mr Amponsah-Mensah said those institutions operating under the guise of fun clubs were gradually coming up, duping unsuspecting people and causing mess in the sector.

“We keep hearing microfinance; the real issue is not microfinance. It is a new thing that is coming up and that is what we have all kept our eyes off, that is what we call the member-owned institutions,” he said.

He added, “these are voluntarily institutions and members would come together and say we want to put our money together and we will give it amongst ourselves as loans. It is a different form that is gradually coming up in this country and causing this mess.”

He said those institutions were not licensed and did not belong to the association of microfinance institutions but were fast gaining roots and added that it was time for the regulator to take a decision on them.

“As a country, we must decide if we would want to regulate them or insist that if you form a group, it is a group; when someone runs away with your money it is your problem. We need to take the bull by the horn and deal with that issue,” he said. 

Clamp down on fun clubs

The Bank of Ghana (BoG) in a bid to rid the sector of non-complaint institutions located a number of these institutions operating under the guise of fun clubs and ripping customers of their deposits.

They included Perfect Edge, Buoyant Investments, Little Drops Helping Hand Association, Care for Humanity International, Financial Giants and God is Love Fun Club.

The Deputy Governor of the BoG, Mr Millison Narh, at a January 8, 2016 press briefing said as regulator, they were taking steps to recover customers’ deposits and ensure that those entities did not continue taking deposits from unsuspecting customers.

“The accounts of the following institutions were also frozen but they have been unfrozen and the depositors are being paid. They are Buoyant Investments, Little Drops Helping Hand Association,” he said.

The BoG, earlier this month, revoked the licences of 70 microfinance institutions for failure to fulfil certain conditions required to enable the BoG to issue them with a final licence to operate.

MFIs still relevant

Micro Finance institutions (MFIs), Mr Amponsah–Mensah noted, had over the years contributed immensely to the provision of funds to most small-scale enterprises that cannot access funds from the universal banks.

That notwithstanding, he said the association would continue to work with the regulator to bring sanity into the industry and rid it of unscrupulous companies.

“We have defined roles and we will, therefore, continue to support the regulator. We are going to suspend those whose licences have been revoked by the BoG,” he said.

MFIs comprises savings and loans companies, cooperative money lenders and the indigenous ‘Susu’ savings groups and they are regulated by the Bank of Ghana (BoG) under the Non-Bank Financial Institutions Act, 2008 (Act 774) and the Banking Act, 2004 (Act,673).

The MFI landscape is growing and statistics from the BoG indicate that there is a total of 546 MFIs made up of 468 microfinance companies, 67 money lending companies and 11 financial non-governmental organisations (NGOs), while another 92 institutions were awaiting the fulfilment of final approval requirement. — GB