MICROCAPITAL BRIEF: MASLOC Halves Interest Rates to 12% as Bank of Ghana Starts $172m Bailout of Microfinance Industry

The Ghanaian government’s Microfinance and Small Loans Centre (MASLOC), a provider of retail and wholesale microcredit, recently received approval to cut its annual interest rate from 24 percent to 12 percent. Meanwhile, the institution has received GHC 75 million (USD 14 million) from the government to expand its operations. This expansion includes a plan to have offices in 70 percent of the nation’s districts by the end of 2019 and every district by the end of 2020. In addition to lending to private microfinance institutions (MFIs), MASLOC offers group and individual loans with terms of up to one year in amounts from GHC 100 (USD 19) to GHC 10,000 (USD 1,900).

At the same time, the government has been tackling insolvency in the country’s financial sector in phases. It completed a bailout of universal banks in December 2018 in the amount of GHC 11 billion (USD 2.1 billion). The estimate to shore up Ghana’s non-bank, deposit-taking institutions is GHC 7 billion (USD 1.3 billion). The first stage of this process is to address troubled MFIs, for which GHC 900 million (USD 172 million) has been budgeted. This stage “is expected to begin by the end of the third quarter [and] significantly trim down the number of microfinance companies in the country.”

As of 2018, there are 566 licensed MFIs in the country, of which 211 are “distressed or folded up,” putting at risk 52 percent of the deposits held by MFIs. While figures specific to MFIs are not available, 700,000 depositors have GHC 741 million (USD 142 million) tied up at troubled MFIs and rural and community banks.

During 2018, the government of Ghana agreed to accept a loan of USD 30 million from the World Bank “to implement and enforce an array of corporate governance, risk management, enhanced capitalisation and financial reporting measures.” This program has yet to get underway.

By the MicroCapital team

Sources and Additional Resources

Statesman article
http://thestatesmanonline.com/index.php/business/4640-interest-on-masloc-microloans-to-be-slashed-in-half

Best News Ghana article
https://bestnewsghana.com/2019/05/28/bog-secures-ghc900m-to-sanitise-microfinance-sector/

MASLOC homepage
http://www.masloc.gov.gh/

Bank of Ghana homepage
https://www.bog.gov.gh/

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