In recent times the Bank of Ghana has been in the news for revoking the approval in principle of some 70 prospective microfinance companies. The issue has since been discussed on various fora but, largely the central bank argues that the facts have been misrepresented.
At a press briefing Friday January 8, 2016 the Bank sought to set the records straight.
Speaking to journalists at the Bank’s premises, deputy Governor Millison Narh, acknowledged the important role of the microfinance institutions in contributing immensely to the deepening of financial intermediation in Ghana. He noted that, they have been providing funds for the lower end of the market that is unbanked and under banked.
According to Mr. Narh, before a microfinance company is licensed to operate, it has to go through two stages of licensing. This, he said is in accordance with sections 6 and 5 of the Banking Act, 2004 (Act 673) as amended and Non Bank Financial Institutions Act, 2008 (Act 774) and the Operating Rules and Guidelines, Notice No. BG/GOV/SEC/2011/04 dated July 11, 2011, and No. BG/GOV/SEC/2013/05 dated Agust 30, 2013 for the establishment of microfinance institutions.
He indicated that the first stage of licensing includes submission of an application accompanied by: a. A certified true copy of the Certificate of Incorporation and company Regulations. b. A business plan indicating a five-year financial projections including evidence of a minimum capital and three year audited accounts for existing companies and to ascertain the viability of the proposal, a Completed Personal Notes Form to check fitness and propriety of the shareholders, directors and key management personnel.
He however, emphasized, “Please note that submission of the above documents does not constitute an approval and the institution is under no circumstance to commence business.”
“The Registrar of Companies has to issue a Certificate to Commence Business to applicants before they can operate and mobilise deposits,” he added.
Mr.Narh further stated that where an applicant’s submission as stated above satisfies the Bank of Ghana, the applicant is then issued with an approval in principle letter to complete the second part of the licensing process and is subject to the fulfillment of the following conditions:
- Verification of the availability of the minimum paid up capital,
- Submission of accounting procedure manuals, Operating Procedures and Policies approved by the Board.
- Receipt of satisfactory status check reports on the shareholders and directors to be conducted by the Financial Intelligence Centre, Ghana.
- Evidence of insurance cover against fire, burglary, fidelity guarantee, etc.
- Availability of business premises with adequate staff operating area, ventilation, lighting, etc and a satisfactory premises inspection report.
And 6. Evidence of membership of the association that the institution belongs to, for example, Ghana Association of Microfinance Companies, Money Lenders Association of Ghana, and Association of Financial NGOs.
Mr. Narh reiterated forcefully that, “the granting of an approval in principle is not a licence to operate, adding that the Certificate to Commence Business should be issued by the Registrar of Companies contingent upon the final approval and issue of licence to operate by the Bank of Ghana.”
He explained that the approval in principle letter which expires after six months is a letter to the applicant to fulfill certain conditions to enable the Bank to issue them with a final approval and licence to operate.
He noted that the six months expiry can be extended for another 90 days upon application and if the Bank is satisfied with reasons for requesting the extension.
In the case of the 70 companies, Mr Narh said they failed to comply with the requirements.
Answering questions from journalists, Mr. Raymond Amanful, immediate past Head, Other Financial Institutions, Supervision Division of the Bank said there are 92 companies in that circumstance, however, they are waiting for the six months expiry period to determine the status of the other 22.
The central bank recently increased the minimum paid up capital for microfinance and money lending companies from GH¢500,000 and GH¢300,000 respectively to GH¢2 million.
“All existing microfinance companies have up to December 2018 to meet the capital requirements, while fresh entrants would require the GH¢2 million prior to granting of the final license.”
“The convergence of capital requirement for microfinance companies is to avoid regulatory arbitrage,” he said.
By Emmanuel K. Dogbevi