Microfinance association promotes self-regulation

Microfinance companies say they have put in place measures to promote self-regulation. Ama Amankwah Baafi writes

The Ghana Association of Microfinance Companies (GAMC) is hopeful that the Internal Rating System (IRS) it had instituted would enable it  test the capacity of its members in complying with the regulatory requirements of the Bank of Ghana.

The IRS is based on 12 key performance benchmarks -  capitalisation requirement, legal status, human resource management, products, services and marketing, credit methodology and human resource management are some of the benchmarks.

The Executive Secretary of GAMC, Mr Richard Amaning told the GRAPHIC BUSINESS that some of the members were able to source funds from the traditional banks.

“The regulation helped member companies to identify some major gaps in their operations as a number of them did not have requisite structures in place. Members took the opportunity to re-structure their companies and also increase their capital base,” he said.

He added the regulation had boosted the confidence of members to embark on vigorous savings mobilisation just as the major financial institutions.

GAMC has 580 members nationwide with Greater Accra and Ashanti regions concentrated as their membership is 291 (50 per cent) and 125 (20 per cent) respectively. Out of these numbers, Accra has 122 licensed companies and Kumasi with 45.

The Head of Banking Supervision at the BoG, Mr Franklin Belynye said they were working to speed up the licensing process, in spite of the volume of applications which is over 700.

In pursuance of the provisions of the Non-Bank Financial Institutions Act, 2008 (Act 774) and the Banking Act 2004 (Act 673) as amended by Act 738, the BoG in July 2011 issued the rules and guidelines for the information of the general public and for compliance by all individuals and entities operating in the microfinance sub-sector.

The regulation framework adopted a tier system of regulation depending on whether the institutions are formal, semi-formal or informal in nature.  

So far, the GAMC said its major challenges were proposed upward adjustment of paid-up capital which it said could put  undue pressure on smaller companies to meet it and the that the regulation had added on more cost to already high operational cost which subsequently affect the interest rates charged by the
companies.

Mr Amaning said the association had introduced a new project, “Operational Software Standardisation Project,” to facilitate members’ ability to report to the regulator timely.

The GAMC has engaged software developers to develop a robust and user friendly microfinance banking software that has the capability to generate operation reports, BoG prudential returns and GAMC’s quarterly reports with ease.  

Also, the BoG has instituted an emergency and quarterly meeting platforms with GAMC to enable both parties to discuss emerging issued relating to regulation and compliance.

Microfinance Institutions (MFI) figures as at June 2013 stood at 144 licensed microfinance companies out of 564, two licensed financial non-governmental organisations out of 29, 345 licensed Susu collectors out of 480, and no licensed money lender out 296.  

At the 7th meeting of the Ghana Microfinance Forum in Accra, a member of the board of directors of the BoG, Dr David Obu Andah, called for a review of the licensing requirements for MFIs in order to raise standards in the microfinance business.

He said the capacity of the staff of the Banking Supervision Department of the BoG should also be built. GB