The Bank of Ghana says it may consider raising the minimum  capital requirement for microfinance institutions  yet again if that will take to sanitise a sector plagued by several challenges.

The Central Bank in 2012 revised the regulatory capital requirement for MFIs to at least GH¢500,000 for companies with one branch, while additional branches are subjected to further capitalisation.

Raymond Amanfu, head of the BoG's Other Financial Institutions Supervisory Department, speaking at a microfinance forum in Accra, said the revision of the capital requirement has made regulation of the sector less cumbersome.

“The increase of the minimum capital requirement has reduced our burden. We have now seen a number of people withdrawing their licences; and if we have to increase it again to reduce the number, we will do that,” he said.

The Central Bank has already licenced over 435 microfinance companies and declined 120 applications with over 200 more pending.

Regulating the high number of microfinance companies has been a tough challenge for the regulator, which created Mr. Amanfu's department to deal specifically with this rapidly-expanding financial sub-sector.

Apart from concerns over their “outrageous” lending rates, microfinance companies have many times been a conduit for the perpetration of fraud through Ponzi schemes that lure depositors with absurdly lucrative investment interest rates.

According to Mr. Amanfu, the central bank is getting tougher on its regulations to weed out dubious entities within the sector. Apart from ensuring strict compliance with the capital requirement, the regulator is keen on promoting good governance in the management of MFIs. “We have strengthened our licensing procedure to probe the ownership of microfinance companies. The era of merely showing that you have the minimum capital requirement is over. We need to critically assess the source of your funding and even how you intend raising future capital,” he said.

The forum, organised by the Ghana Microfinance Institutions Network with support from Ministry of Finance and International Fund for Agricultural Development (IFAD), was on the theme “Liquidity, Governance and Microfinance Regulation”.

The regulator, Mr. Amanfu added, is collaborating with the security agencies to close down MFIs operating without permit. In Accra alone, the Central Bank says it has identified close to 40 of such unlicensed entities and will soon clamp down on them.

The regulator will also sanction licensed MFIs that have ventured into areas outside their mandate. Proscribed activities such as forex trading have become rampant among some microfinance companies.

Some MFIs, Mr.' Amanfu said, are employing unsustainable means to lure depositors. Usually, these MFIs reward every deposit with items such as mobile phones.

Most of these companies attract these deposits to drive branch expansion in order to increase their coverage. But Mr. Amanfu said visibility cannot be equated with viability.