‘Savings and Loans, not same as microfinance companies’
The Ghana Association of Savings and Loans Companies (GHALSAC) has called on the public to differentiate between members of the association and microfinance companies.
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According to the President of GHALSAC, Dr Emmanuel Owusu, the lumping of savings and loans companies together with other microfinance providers was affecting the image and fortunes of the members of GHALSAC, given the reported cases of unethical practices by some microfinance service providers.
He was speaking at a forum in Accra last Tuesday to sensitise media personnel to the operations of savings and loans companies.
The microfinance sector has been hit by a series of scandals which have resulted in the revoking of the licences of some of the operators by the Bank of Ghana (BOG) and the prosecution of some owners of those companies.
Differences
Ghana’s financial services sector is classified into three main categories — banking, non-banking and microfinance institutions.
Savings and loans companies fall under the non-banking financial institutions category, while microfinance companies fall under microfinance category.
According to BoG regulations, a savings and loans company is supposed to have an initial capital requirement of GH¢15 million, while that of a microfinance company is GH¢500,000.
Whereas savings and loans companies require licences before they can operate, microfinance companies can operate with provisional licences before they obtain their final licences.
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Perhaps the most distinctive difference between the two sectors is the amount they can take from their depositors.
While clients of savings and loans companies can deposit any amount into their accounts, a client of a microfinance company cannot deposit more than five per cent of the company’s capital at a go.
Effects
Dr Owusu said some people erroneously associated savings and loans companies with such scandals because of the similarities between their operations, with some people even thinking that the two entities were the same.
“These unethical practices have created problems for all sector players but most especially savings and loans companies due to some similarities in service provision perceived by clients of both sector categories and the public as a whole,” he said.
On ways to help correct the perception that the two entities were the same, he said GHALSAC was advocating a new name for the savings and loans sector.