The President during his state of the nation address, said while there has been a proliferation of microfinance companies over the past five years, these companies fall under the direct supervision of the Bank of Ghana.
“Unfortunately, a lack of effective supervision on the part of the central bank has resulted in many cases in which microfinance companies licensed by the Bank have breached the rules of procedure they were supposed to follow and have created supposed pyramid schemes that eventually came crashing down,” he said.
DKM Diamond Microfinance in the Brong Ahafo Region, flouted the regulations guarding the sector and ran a Ponzi scheme, offering unsustainable interests of 50 per cent and over.
The company diverted its customers’ deposits to affiliate companies and into excessive capital expenditure, resulting in suspension by the Bank of Ghana and outrage and vandalism by its angry depositors, some of whom had lost their entire savings.
It has since been struggling to refund the deposits – in excess of GH¢77 million – and the Bank of Ghana is liquidating its assets.
President Mahama said the depositors should have been protected by “a more robust inspection and supervisory regime” by the central bank.
He said liquidation of the company’s assets should be part of a comprehensive package that looks at the protection of the livelihoods of small depositors, with the objective of reimbursing legitimate customers of their original deposits.
“This initiative should be conceived in the context of a broader solution that will permanently sanitize and restore credibility to the microfinance sector and strengthen the Bank of Ghana’s supervision,” the President said.
He urged parliament to fast-track the Ghana Deposit Protection Bill which would protect small depositors in any such future instances.
“That bill is coming to you and if you pass it, in future we will not have things like DKM,” he told parliament.
By Emmanuel Odonkor