MICROCAPITAL BRIEF: Bank of Ghana (BOG) Pursues Tighter Regulation, Enforcement of Microfinance Sector

The Bank of Ghana (BOG) reportedly has called on microfinance institutions (MFIs) to apply for operational licenses and operate by national bank rules. BOG warned that it “would close down and prosecute MFI operators who continue to operate and refuse to apply for an operational license,” although no deadline was disclosed. As MicroCapital reported at the time, BOG issued a new license regime to regulate the microfinance industry in September 2011. As of March 2012, approximately 300 out of 3,000 MFIs have applied for a license [1].

BOG reportedly viewed the microfinance industry as “one characterised by unbridled and indiscriminate springing up of microfinance institutions (MFI), with virtually no supervision.” BOG identified the following as challenges for the microfinance sector: unsustainable returns to customers, unqualified managers and failure to provide the requisite capital to cover risk. Along with regulation and enforcement, BOG also plans to engage registered MFIs, such as some of the 350 members of the Ghana Association of Microfinance Companies (GAMC), to develop solutions for the industry [1].

For the year 2010, 20 microfinance institutions (MFIs) in Ghana report to the US-based nonprofit Microfinance Information Exchange (MIX) an aggregate gross loan portfolio of USD 91.9 million outstanding to approximately 241,000 borrowers and aggregate deposits of USD 93.6 million.

By Brendan Millan, Research Associate

About Bank ofGhana(BOG): Formed in 1957, BOG is the central bank of Ghana. BOG has regulatory and supervisory authority over financial institutions in Ghana, including rural and community banks, savings and loan companies and credit unions and cooperatives.

About Ghana Association of Microfinance Companies (GAMC): Registered in 2011, GAMC is a network of companies providing microfinance services. Member companies offer both lending and deposit products to their clients. The association has approximately 350 members as of 2012.

Sources and Resources:

[1] All Africa: “Ghana: Microfinance Companies Charged to Operate By National Bank’s Rules” by Ernest Best and Anane Kumasi. http://allafrica.com/stories/201203160383.html

MicroCapital.org Article, March 12, 2012, “Bank of Ghana (BOG) Receives 300 Microfinance License Applications,” http://www.microcapital.org/microcapital-brief-bank-of-ghana-bog-receives-300-microfinance-license-applications/

MicroCapital.org Article, September 15, 2011, “Bank of Ghana Issues New Licensing Regime to Regulate Microfinance Industry”, http://www.microcapital.org/microcapital-brief-bank-of-ghana-issues-new-licensing-regime-to-regulate-microfinance-industry/

MicroCapital Universe Profile: Bank of Ghana (BOG), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bank+of+Ghana+%28BOG%29

MicroCapital Universe Profile: Ghana Association of Microfinance Companies (GAMC), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Ghana+Association+of+Microfinance+Companies+%28GAMC%29

Browse the MicroCapital Universe and add your entry to the wiki at: http://www.microcapital.org/microfinanceuniverse/


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