MICROCAPITAL BRIEF: Bank of Ghana Increases Liquidity Requirement for Microfinance Financial Institutions

The Bank of Ghana, a regulatory and supervisory authority over banking and financial institutions in Ghana, recently increased the minimum capital requirements of microfinance institutions (MFIs) to GHS 300,000 (USD 138,000) for MFIs that do not accept deposits and GHS 500,000 (USD 230,000) for deposit-taking MFIs [1]. This is an increase from the previous requirement of GHS 60,000 (US 27,700) and 100,000 (USD 45,800) for non-deposit taking and deposit taking MFIs, respectively [2]. In addition, MFIs with less than 5 branches will require additional capital of GH 100,000 (USD 46,000) per branch and MFIs with more than 5 branches will require GHS 200,000 (USD 92,000) per branch [1]. The new requirements allow MFIs to spend 25% of initial paid-up capital on building capital and the rest must be held as liquid cash. The new requirements are expected to decrease MFI reliance on public funds and increase MFI lending capacity. Existing MFIs have until June 30, 2016 to meet the new requirements.

The Ghana Association of Microfinance Companies (GAMC), an association of 560 member companies providing microfinance services in Ghana, supports the change.

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 Megan McGowan, 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.

About Ghana Association of Microfinance Companies (GAMC)

Ghana Association of Microfinance Companies (GAMC) is an association of 560 member companies providing microfinance services in Ghana. Member companies offer both lending and deposit products to their clients. It is limited by guarantee and was registered in Ghana on the 20th of May, 2011. As of December 31, 2012, GAMC held assets of approximately GHS 279,000 (USD 131,000) and a loan portfolio of GHS 850 million (USD 400 million).

Sources and Additional Resources

[1] Modern Ghana, “Association Welcomes BoG’s Recapitalization of Microfinance Firms,” September 10, 2013, http://www.modernghana.com/news/488559/1/association-welcomes-bogs-recapitalization-of-micr.html

[2] Bank of Ghana, “Operating Rules and Guidelines for Microfinance Institutions,” April 2011, http://www.bog.gov.gh/privatecontent/Banking_Supervision/Operating Rules and Guidelines for Microfinance Institutions.pdf

MicroCapital.org Article, August 22, 2013, “MICROCAPITAL BRIEF: Thirty Microfinance Institutions (MFIs) Close in Ghana,”https://www.microcapital.org/microcapital-brief-thirty-microfinance-institutions-mfis-close-in-ghana/

MicroCapital.org Article, August 6, 2013, “MICROCAPITAL BRIEF: Money Lenders Association of Ghana Signs Memorandum of Understanding to Provide Members with Microinsurance Products,” https://www.microcapital.org/microcapital-brief-money-lenders-association-of-ghana-signs-memorandum-of-understanding-to-provide-members-with-microinsurance-products/

MicroCapital Profile: Bank of Ghana (BoG), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bank+of+Ghana+%28BOG%29

MicroCapital Profile: Ghana Association of Microfinance Companies (GAMC), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Ghana+Association+of+Microfinance+Companies+%28GAMC%29

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