Friday 23 March 2018

Microfinance companies kick against new minimum capital requirement

Microfinance companies kick against new minimum capital requirement
( 07/03/13)

Microfinance operators have kicked against any increase in the minimum capital required for their operations. As part of its review of the sector’s microfinance regulations, the Bank of Ghana has initiated moves to soon increase the 100 thousand minimum capital in a bid to address the current financial challenges in the sector. This has been triggered by the recent serial reports about many of the firms closing down due to financial difficulties. The issue dominated discussions at the first Microfinance Forum organized here in Accraby the Ghana Microfinance Institution Network.
Some of the operators of microfinance firms who later spoke to Joy Business argued that any increase in the capital would not be in the interest of the industry. “I think it’s a very bad move because it’s rather going to encourage a lot of underground, unregulated and illegal microfinance operations because many companies cannot afford the amount” One of the operators stated. “Its just a year now since they introduced the current minimum capital so what empirical evidence do they have to say that its not helping the firms” another questioned”

Microfinance Consultant,Roderick Ayeh who first argued against the increase in capital said tightening regulation is a more prudent option for addressing the current challenges in the sector.

He told Joy Business, increasing the capital is only likely to compound the situation.

“When you raise the capital higher, you’re going to get more people who are only for the profit aspect because they have to cough the money to get into business. So we would have products and services that may not necessarily target the pro-poor who microfinance is for" he said.

"The problem we’re having is not necessarily about capital requirement. Most of the issues are only a matter of liquidity management and so the ends can only be tightened from the regulatory perspective” he added.

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