Some blacklisted Microfinance institutions have questioned the decision of the Bank of Ghana, claiming the bank treated them unfairly when it revoked their licences.

The bank claimed the affected 386 microfinance and microcredit companies were insolvent.

The number includes 192 microfinance companies whose licences were revoked and another 155 asked to stop operations.

The Central Bank in a press release Friday explained that regarding the microfinance companies, it took the action pursuant to section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).

According to this Act, the Central Bank can revoke the licence of a bank or Specialised Deposit-taking Institution (SDI) where the Bank of Ghana determines that the institution is insolvent or is likely to become insolvent within the next 60 days.

But the affected institutions are fighting back.

Founder of one of the affected companies, Kwaku (not his real name) told Joy FM on Monday the bank applied new bank regulations retrospectively. That, he said, is why his company was affected.  

According to him, as far back as 2013, the BoG told him to regularize his business, which he started with a capital of Ghc 100,000 with another partner in South Africa.

At the time, their motive, apart from making ends meet, was also to help lower income earners to be able to access loans for their businesses.

He said prior to an impromptu Bank of Ghana inspection in 2018, (the bank gave them two days’ notice instead of the conventional two weeks’ notice), they had started a number of internal reforms.

After the central bank's inspection of their books in 2018, they were told to initiate a number of corrective measures, including renewal of their license.

They did that. They also kept the bank updated on all their dealings.

According to Kwaku, it came to him and his company as a “shock,” when after following all the bank’s directives, their licence were revoked based on what they did five years ago.

He confessed that the company has given out some two million Ghana cedis worth of loans and is working assiduously to redeem same. But the current directive of the central bank will make that an arduous task.

While he advises the general public to pay their loans on time, he said the Bank of Ghana must understand that in taking actions to protect depositors, it ought to also consider the investors who put their money in the business.

“we are part of the depositors,” he argued.

But the bank of Ghana has defended its actions

We went beyond resolvability.

The Bank of Ghana has justified its decision to close down some 350 micro financial institutions.

According to Head of Other Financial Institutions Supervision Department, Kofi Amoah Awuah,  the accusations of highhandedness are not supported by the facts.

In his words, the bank “went beyond salvation and resolvability in arriving at its decision. “

The infractions committed by the blacklisted companies had gone beyond “simple breaches” to “serious vulnerability” where the bank needed to step in to protect depositors’ funds.

Awuah recounted how the decisions of the Bank of Ghana are not impromptu. According to him, the bank engaged the affected institutions over a period of not less than two years.

During this period of engagements, where they identified minor breaches, they merely cautioned and fined the companies involved as stipulated by the law.

“We directed them on the way forward and yet they kept breaching,” Awuah said justifying the actions of the Bank.

However, we have gone beyond “interventions and corrective actions.” This is a trigger of insolvency. We have worked with them. “We did everything.”

We meet them quarterly, sometimes annually, and as regularly as reports come to us. Awuah said

He added that despite the action, their doors are still opened to engage anybody or institution that feels unfairly treated.

BOG action necessary evil

Executive Director, Ghana Microfinance Institutions Network has said that the action taken by the Central Bank is a necessary evil.

According to Mr. Eric Gyamfi, he is disappointed that despite the great beginning of some of the companies “they ended this way.”

The Network has, however, been expecting this outcome, it, however, was unsure exactly when the announcement was going to take place.

He argued that some of the companies were directly engaged.