Dr Henry Wampah, BoG Governor

The Bank of Ghana has announced tough measures to halt the activities of illegal financial institutions and fun clubs that transact microfinance businesses without license contrary to section four of the Banking Act, 2004 (Act 673).

As part of the exercise, the Central Bank has cautioned the general public to desist from conducting businesses with some ten financial institutions which are unlicensed.

The institutions include, Care for Humanity international in Wa, Sunyani and Techiman, Buoyant Investment Limited in Techiman and Jirapa, God is Love Fun Club in Sunyani, Techiman and Nkoranza; and Little Drops Helping Hand in Ho, Techiman, Sunyani and Berekum.

The rest are Great Winners Fun Club in Kete Krachi and Dambai, Financial Giants  Fun Club in Bolgatanga, Wa and Sunyani;  Creative Fun Club in Koforidua, as well as   Perfect Edge Group, Perfect Business Fun Club, and L.P.M Eye Adom Fun Club, all in Sunyani.

According to the BoG, these unlicensed institutions attract their clients by offering very high and unsustainable interest rates but fold up within a short time due to their inability to meet depositors? demands.

Addressing Financial Journalists in Accra, the Head of Other Financial Institutions Supervision Department of the BoG, Mr. Raymond Amanfu stated that the rate at which illegal financial institutions are springing up in the country is alarming and a threat to the good ones in the financial sector.

?These institutions are mushrooming in the rural areas especially Brong Ahafo, Upper East, Upper West, Northern and Western region?, he said, adding that they promise unsuspecting customers interest rates between 30 to 55 percent every two months.

Mr. Amanfu disclosed that with the exception of DKM, the Central Bank has not placed a moratorium on any microfinance institution in the country.

?When they collapse in no time, they rather create an impression that the Bank of Ghana has placed a moratorium on their operations or is keeping their funds?.

He warned the general public that, there is no microfinance institution in the country that keeps its customers? savings with the Central Bank.

?Unfortunately, these cheats are well encouraged by some media houses who carry wide publicity on these unlicensed companies and their activities?, he said, cautioning the media to conduct background checks on financial institutions before airing their adverts.

Explaining some of the factors that contribute to their collapse, Mr. Amanfu stated that some MFIs in their quest to increase income grant credit to customers without roper credit appraisal, adequate security and amounts higher than the prudential limits.

?Another reason is that they seem to equate visibility with viability and had embarked on some branch expansion without the needed capital, thus putting customers deposits at risks?, he said.

He stated that their activities are further compounded by weak corporate governance structures and inexperienced management oversight coupled with fraud issues.

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