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🇬🇭 Ghana /Economy & Trade

Microfinance firms urge BoG to review GH¢50m capital requirement

From Ghanaian Times · () English

Summarized and contextualized by DistantNews.

At a glance

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  • Microfinance firms in Ghana are urging the Bank of Ghana (BoG) to reconsider the proposed increase in minimum capital requirements from GH¢2 million to GH¢50 million.
  • Industry stakeholders warn that the sharp increase, if implemented as is, could threaten indigenous firms and hinder financial inclusion.
  • Concerns were raised at a roundtable discussion in Accra focused on reshaping microfinance sector reforms.

Ghana's microfinance sector is pushing back against a significant proposed increase in minimum capital requirements, warning it could cripple many local businesses and reduce access to financial services. Microfinance companies are appealing to the Bank of Ghana (BoG) to reconsider its plan to raise the capital threshold from GH¢2 million to GH¢50 million within a short timeframe.

takes into account the size and operational scope of individual institutions.

— Professor James PeprahProfessor at the School of Economics of the University of Cape Coast, suggesting a tiered recapitalization approach.

Industry stakeholders voiced their concerns at a roundtable discussion in Accra on 'Reshaping the Microfinance Sector Reform in Ghana: Balancing Stability, Inclusion and Growth.' They argue that the proposed jump is excessively high and may be unattainable for numerous operators, potentially leading to widespread business closures. This could have severe consequences for employment, small businesses, and the millions of customers who rely on microfinance services.

it would be difficult for many firms to raise the required capital within a year.

— Mr David Narh AgudaPrincipal Consultant at Protege Consult, describing the recapitalization timeline as unrealistic.

The BoG has mandated the recapitalization by the end of the year as part of broader reforms aimed at strengthening governance, improving operational resilience, and restoring confidence. However, experts like Professor James Peprah of the University of Cape Coast suggest a tiered approach based on institutional size and scope. He also advocated for limited foreign participation to protect indigenous Ghanaian-owned institutions.

microfinance institutions played a critical role in serving customers at the lower end of the banking market and therefore needed support to remain viable and competitive.

— Mr Ebenezer OdameChief Executive Officer of Equity Microfinance Limited, stressing the importance of microfinance services.

Consultants and CEOs within the sector, including David Narh Aguda and Ebenezer Odame, described the timeline as unrealistic. They proposed a phased implementation, allowing firms adequate time to mobilize funds and invest in necessary technology and operational systems. They emphasized the critical role microfinance institutions play in serving lower-income customers and the potential ripple effects of their collapse on the broader financial industry. Dr. Steve Bediako highlighted the vital contribution of these institutions to financial inclusion, particularly in underserved communities.

microfinance institutions remained vital to financial inclusion, particularly in underserved communities.

— Dr Steve BediakoChief Executive Officer of MGI Microfinance Company, emphasizing the role of microfinance in financial inclusion.
DistantNews Editorial

Originally published by Ghanaian Times. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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