The Bank of Ghana (BOG), Ghana’s central bank and main financial regulator, recently announced an increase in minimum capital requirements for microfinance institutions (MFIs) in Ghana from GHS 100,000 (USD 48,000) to GHS 500,000 (USD 240,000). According to BOG, the new policy will reduce the unregulated and reportedly unfettered nature of MFIs in Ghana, including the alleged pervasiveness of “liquidity crises, too many branches scattered across the country, clients coming in for loans and not paying” and “incompetent staff.” Dr Yaw Gyima-Larbi, head of microfinance at BOG, added that “of the 228 licenced MFIs [in Ghana], only about 50 report accurately and regularly to the Central Bank,” which is “becoming problematic.” By increasing requirements, BOG allegedly hopes to weed out the underperforming, under-regulated MFIs in Ghana [1].
Microfinance consultant Roderick Ayeh reportedly cautioned that while additional regulation is necessary, the higher capital requirements will disproportionately attract wealthier investors who “may not necessarily target the pro-poor [that] microfinance is for.” Additionally, an anonymous operator at the Ghana Microfinance Institution Network, a collection of MFIs in the country, warned that the new policy will “encourage a lot of underground, unregulated and illegal microfinance operations because many companies cannot afford the [higher] amount. [2]”
As of year-end 2012, BOG has total assets of GHS 31.5 billion (USD 16.5 billion), return on assets (ROA) of 4.9 percent and return on equity (ROE) of 25.8 percent
By Michael Averell, Research Associate
About Bank of Ghana (BOG)
Established in 1957, the Bank of Ghana (BOG) has regulatory and supervisory authority over banking and financial institutions in Ghana, including rural and community banks, savings and loan companies, credit unions and cooperatives. The Bank of Ghana is to conduct annual on-site audits of these institutions; however, nonprofit organizations in Ghana are not regulated by any government agency. As of year-end 2012, BOG has total assets of GHS 31.5 billion (USD 16.5 billion), return on assets (ROA) of 4.9 percent and return on equity (ROE) of 25.8 percent
Sources and Additional Resources
[1] Spy Ghana News: “Bank of Ghana to raise minimum capital of MFIs,” http://www.spyghana.com/bank-of-ghana-to-raise-minimum-capital-of-mfis/
[2] Ghana Web: “Microfinance companies kick against new minimum capital requirement,” http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=278479
MicroCapital story, May 17, 2013, “MICROCAPITAL BRIEF: Bank of Ghana Grants Licenses to 171 Financial Institutions as 116 Fraud Cases Involving Unlicensed Institutions are Pending,” https://www.microcapital.org/microcapital-brief-bank-of-ghana-grants-licenses-to-171-financial-institutions-as-116-fraud-cases-involving-unlicensed-institutions-are-pending/
MicroCapital story, March 26, 2013, “MICROCAPITAL EVENT: African Center for Peace Building, Bank of Ghana to Host West Africa Microfinance Conference (WAMIC), April 24-26, 2013, Accra, Ghana,” https://www.microcapital.org/microfinance-event-african-center-for-peace-building-bank-of-ghana-to-host-west-africa-microfinance-conference-wamic-april-24-26-2013-accra-ghana/
MicroCapital Universe Profile: Bank of Ghana (BOG) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bank+of+Ghana+%28BOG%29
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