The Bank of Ghana made no mistake in licensing microfinance companies to operate in Ghana’s financial service space, says the Ghana Association of Microfinance Companies (GAMC).

Members are not enthused at recent comments by Managing Director of HFC Bank, Asare Akoffo, that the licensing of microfinance companies was a ‘mistake’, as he alluded to operational challenges within the microfinance sub-sector.

According to Mr. Akuffo, the regulator could have been more prudent in its decision by restricting microfinance authorization to traditional financial institutions such as the universal banks, savings and loans companies and rural banks.

National Chairman of the GAMC, Collins Amponsah-Mensah describes the comment as ‘unfortunate’, stating that the financial space of Ghana is still ‘virgin’ with high number of unbanked population.

“What are we fighting for?” he queried. “Microfinance is more of a social activity first before profit and every business person would want to access the profitability first before they go in; so for a lot of the banks it’s not an attractive area… so I think that Bank of Ghana didn’t make any mistake coming out with the regulation.”

Mr. Amponsah-Mensah says it behooves on industry players to ensure the sector develops in the interest of businesses and individuals at the micro level of the economy.

“If there are challenges, let us all propound solutions to it so that we can work together as a team and ensure that nobody is left out of the financial service space because you’ll grant a loan to a corporate entity to do business, I will grant a loan to a petty trader because the person also needs it to do business. At the end of the day, we all contribute to the economic performance of the country,” he opined.

The microfinance companies in the northern sector of Ghana have been taking stock of their performance in 2013.

They admit last year was a turbulent year for the financial sub-sector, with a good number of them going into liquidity challenges and others folding up, whilst clients of such firms lost money within the period.

According to the microfinance institutions, most of the challenges were self-inflicted, especially on the issue multi-branching which Franklin Belnye, BoG’s Head of Banking Supervision has described as “visibility not being viable”.

The MFIs failed to apply best practices in operations, whilst the Association could not adequately instill discipline in members, observed Mr. Amponsah Mensah.

He however believes the storm of distress and panic withdrawal is over, stating that 2014 looks favourable for the microfinance sub-sector.

“In the years ahead, people are going to be very careful in the way they do this business,” he said. “In the past, most of us felt that growing in numbers was equivalent to growing in branches and so that was that competition to just expand by opening branches here and there, but from what we went through last year, the lessons we’ve learnt is that growth doesn’t mean having several branches; you can stay in one branch and still grow.”

The industry regulator has licensed over 400 firms since the new regulation came into force.

Mr. Amponsah-Mensah expects the Bank of Ghana push a lot more attention to supervision to instill discipline in the industry.

“Let’s put in proper supervisory structures; let’s engage the Association, let’s charge them with some of the responsibilities so that they can also play a role to support with the supervision,” he suggested.