The central bank is simply overwhelmed by the sheer numbers in the turbulent Micro Finance sector, hence the need for an apex body in the similitude of the ARB Apex Bank which regulates rural banks, Kafui Amegah, CEO of Eclipse Microfinance Limited has said.

In the wake of the DKM rumpus, the central bank has said it will establish regional monitoring offices for Micro Finance Institutions (MFIs), but Mr. Amegah believes the apex body idea would serve the purpose better.

“We have close to about 700 micro finance institutions, and we have probably about 25 or 30 officers working with the Other Financial Services department [at BoG]. These people cannot regulate all these 700 institutions. You have a relationship officer from Bank of Ghana and he is taking care of about 50 micro finance institutions; how can he handle them all?” he asked in an interview with the B&FT.

“But if you have a regulatory body like what is happening with the rural banks, the Apex bank which is giving the Bank of Ghana a supporting role, it would work better because you would be able to have an oversight responsibility over all these MFIs; they will feel they belong, and then when somebody is going wrong you can bring that person to check,” Mr. Amegah said.

“Currently, when micro finance institutions have issues they do not have anybody to run to; it is depositors’ money that is at risk,” he added.

The ARB Apex, which is a ‘mini-central bank’, was set up under similar circumstances. In a bid to deepen financial inclusion, the central bank fostered the rural and community banks idea. But it soon realised that to manage them effectively, the ARB Apex Bank was necessary.

As part of its mandate, the ARB Apex Bank sources funds for on-lending to the rural and community banks and bails out those in distress.

It conducts both on-site and off-site inspection services to address the problems of inadequate book-keeping, non-observance of internal control measures, and lack of regular inspection for the rural and community banks.

It also trains staff and directors of rural and community banks, guarantees payment instruments, develops credit assessment procedures, and monitors loans and advances.

According to Kafui Amegah, whose company gained entry into the Sierra Leonean market last year, turmoil in the micro finance sector “is purely a corporate governance issue”.

He says: “You have a micro finance company where the lead entrepreneur seems to see people’s deposits as his own money, and therefore uses it anyhow; and he does not have controls because he does not have corporate governance rule – a board that checks what he does”.

The sector, he said, needs to be well-nurtured and supported to grow, since it fills a yawning gap left by the universal banks, which are not amenable to the needs of SMEs.

“The common market woman sitting in her corner and does not have money to work needs the micro finance, because the banks will not walk to her.”

The central bank has had a tough time trying to contain the shenanigans of conmen who promise fantastic interest rates to depositors, only to end up misusing their monies.

To curtail the numbers, the BoG issued a directive requiring MFIs which formerly needed GH¢100,000 to operate to ramp-up their core capital to GH¢2million by 2018.

In the DKM Micro Finance Limited saga, directors of the company are said to have diverted GH¢77.26million of depositors’ funds to subsidiary companies.

An investigation by the Financial Intelligence Centre of the BoG indicated that the company had a total deposit liability of GH¢115.2million from customers, but had only GH¢10.8million in its accounts at the time of investigation.