Microfinance institutions are expecting confidence among customers to soar following the passage of the Deposit Protection Bill by parliament.

The bill would protect depositors from unforeseen circumstances that may result in loss of funds.

There’s been a growing scandal within the microfinance sector recently because of the failure of some firms to pay customers their deposits.

Millions of cash deposited by the customers were locked up, following the BoG’s move in 2015 to stop Diamond Microfinance Company (DKM) and others from operating over concerns that there were violating the microfinance regulations.

The company was alleged to have invested about GH¢77 million of its customers’ deposits in its subsidiary companies – DKM Airlines Company, DKM Fuel Station, DKM Transport, DKM Shea Butter Company and DKM Mining Company, among others.

The Registrar-General’s Department under the Ministry of Justice was recently engaged by the Bank of Ghana (BoG) to handle the liquidation processes of DKM after scores of Ghanaians lost millions of cedis after the microfinance company runs into financial challenges.

But, with the passage of the bill, Vice Chairman of the Ghana Microfinance Institutions Network, Ekow Orleans Boham says this should allay the fears about banking with microfinance institutions.

"We all know that when you have insurance against risk you are confident knowing you are walking on a safer path than previously. It will also boost confidence in the sector and I believe it will be good for the industry as well," he said. 

Mr Boham explained that the Deposit Protection Bill is an insurance that goes with deposits although the depositor will not have a 100 percent cover with their financial institution although they seek to enjoy some respite in case there is an issue with a particular financial institution. 

"It does not, however, take away the due responsibility that the financial institution has in terms of safeguarding the deposits of the customers," he added.

The bill will be operational after it receives presidential assent for it to become law.