MICROCAPITAL BRIEF: Depositors Withdraw Savings from Microfinance Firms in Kumasi, Ghana amid Lack of Safety Nets for Clients

High rates of deposit withdrawals reportedly are occurring in Ghanaian city of Kumasi, which allegedly is attributed to the lack of safety nets protecting depositors in case firms are shut down by the Bank of Ghana (BoG), the country’s main financial regulator. The National Chairman of the Ghana Association of Microfinance Companies (GAMC), Collins Amponsah Mensah, pointed to frequent branching of firms as a deterrent to adequate control over their operations, thus prompting BoG to close them: “We have seen huge withdrawals in member companies and this can’t continue; there should be a way out… We keep prompting ourselves that the more you branch the riskier it becomes and you also lose hold of control over your operations” [1].

There have been reported incidents of firms closing and taking with them depositors’ savings in many areas of the country [2]. As a response to these incidents, discussions resound about creating Deposit Insurance Schemes that would guarantee that depositors get their money back if banks suffer losses or are forced to shut down [2]. The number or percentage of savings withdrawals from microfinance firms has not been reported.

GAMC is set to sign a Memoranda of Understanding with the Bank of Ghana, which would ensure that microfinance companies in Ghana share in regulatory responsibilities designated to BoG [1]. Ghana’s microfinance institutions subsequently will have a role in assuring that regulatory structures are established and monitored within their network of institutions.

In December 2011, the total assets reported for the Bank of Ghana were GHS 12.4 billion (USD 6.6 billion). GAMC does not report to the US-based nonprofit Microfinance Information Exchange (MIX) and financial data for GAMC is not available.

By Anesa Kratovac, Research Associate

About The Bank of Ghana (BoG)

The Bank of Ghana 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 December 2011, BoG reported total assets of GHS 12.4 billion (USD 6.6 billion).

About Ghana Association of Microfinance Companies (GAMC)

GAMC is an Association of companies providing microfinance services. 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. The Association has approximately 500 members as of July, 2013. GAMC does not report to the US-based nonprofit Microfinance Information Exchange (MIX) and financial data for GAMC is not available.

Additional Sources and Resources:

[1] My Joy Online-Business Website Article, June 20, 2013, “High savings withdrawal hits microfinance firms in Kumasi,” http://business.myjoyonline.com/pages/news/201306/108212.php

[2] Ghana Web Business News Website Article, May 17, 2013, “Microfinance faces imminent bubble, http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=274229

The Bank of Ghana Website, http://www.bog.gov.gh/

MicroCapital.org Article, April 25, 2013, “MICROCAPITAL BRIEF: Ghana Association of Microfinance Companies, Star Microinsurance to Help Microbanks Offer Insurance,” https://www.microcapital.org/microcapital-brief-ghana-association-of-microfinance-companies-star-microinsurance-to-help-microbanks-offer-insurance/

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

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

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/