DKM Diamond Microfinance Company Limited squandered GHS77million of investors’ funds by diverting the money into the manager’s subsidiary firms – a situation frowned upon by the central bank – which led to the closure of the firm.
The investments of hundreds of clients, who invested in the firm, as well as several other fan clubs that were operating as microfinance institutions in the region, have been locked up as a result of their ill activities.
President John Mahama recently told Parliament in his State of the Nation Address that the situation could have been averted had the Bank of Ghana – the regulator – been vigilant and played its supervisory role well.
Speaking on the issue on Wednesday March 2, Mr Addae-Mensah said that there was little the Bank of Ghana could have done since most of the fan clubs involved in the scam were not registered as MFIs and thus did not fall under the regulatory umbrella of the central bank.
“…Everybody is pointing fingers at the Bank of Ghana and everybody is saying the Bank of Ghana didn’t do A,B,C. No…some of them are not even registered with the Bank of Ghana in the first place, let alone for them to go in there and regulate,” Mr Addae-Mensah said.
According to him, since the investment industry is no “Mickey Mouse thing”, it was also incumbent on prospective investors to do proper due diligence before putting their money into any firm that promises them huge returns as DKM and other firms did.
“Did you check whether the company you were putting your money in has a regulator… or you assumed and you are pointing fingers at the Bank of Ghana? What should the Bank of Ghana do when the guys are not registered under their umbrella? They have no authority or no right to go in there and check their books, so it’s important that you make sure, where you are putting your money has a third party properly established regulator.
“Databank is regulated by the Securities and Exchanges Commission (SEC), as should all investment companies. Commercial banks are regulated by the central bank, pension funds are regulated by the National Pensions Regulatory Authority (NPRA), insurance firms are regulated by the National Insurance Commission (NIC), so there is a regulator for any properly established finance house and as an investor, you must check this out,” Mr Addae-Mensah warned.
As far as he is concerned, the Bank of Ghana cannot be blamed “entirely” for the MFI scam. “I think there are two of the firms that were under the umbrella of the regulator, but most of the others were not even on their radar. They are fan clubs, everybody is entitled to free associations…they can go ahead and do that.”