BoG to weed out unscrupulous microfinance institutions

Iddi Yire, GNA

Accra, Aug 18, GNA –
The Bank of Ghana (BoG) is strengthening its licensing requirements in order to
weed out unscrupulous microfinance institutions from the system.

Dr Abdul-Nashiru
Issahaku, the Governor of Bank of Ghana, said recent events had shown that
unregulated and poorly supervised financial systems might lead to risky
behaviours and undermine the growth process.

He said for this
reason the Bank was taking steps to continually improve its regulatory and
supervisory responsibilities to ensure that only strong and well-managed banks
and microfinance institutions operated in the country.

Dr Issahaku made
these remarks at the fifth Ghana Economic Forum in Accra.

The two-day forum,
which is being organised by the Business & Financial Times, is on the
theme: “A Ghanaian-owned Economy – Setting the Agenda for Achieving It.”

The theme was chosen
to reflect the increasing need for more high-end jobs and investments in the
economy that would keep monies home even as foreign direct investments takes
its share.

He said the Central
Bank would continue to ensure that commercial banks in the country were
well-capitalised and regularly monitored.

He said in
particular, the Bank had been carrying out periodic increment in the minimum
capital requirement of commercial banks.

Dr Issahaku said
this was to enable them to be well-resourced to undertake huge loan requests,
especially from the mining and the burgeoning crude oil sector.

He said in addition,
the Bank had recently recruited more staff for the Banking Supervision
Department and Other Financial Institutions Supervision Department to
strengthen its supervisory role.

He noted that the
Central Bank had ensured competition among the various banks by licensing more
qualified banks to operate in the sector.

The Governor said
promoting competition had enhanced efficiency and productivity within the
banking system.

“We have also built
an appropriate credit infrastructure to support credit delivery, which would in
turn help lower the ratio of impaired loans and address the risks in lending,”
he said.

“These include the
establishment of the Collateral Registry, licensing of credit reference bureaus
and the establishment of commercial courts.

“For its functions
to be strengthened, the Collateral Registry has recently been transformed into
a department,” Dr Issahaku said.

He said the private
sector was often viewed as the engine of economic growth and job creation in
many economies; thus, policies that supported private sector growth and
development were critical for sustaining economic growth.

He said in
particular, BoG’s efforts at expanding the financial sector and capital markets
through a series of financial sector reforms would ensure efficient allocation
of resources to firms with the most promising prospects through information
gathering and screening of borrowers.

The Governor said
this would allow firms with the best prospects to secure funds and make the
necessary investments in capital formation leading to economic growth and job

On long-term
structural reforms, the Governor said although prudent monetary and fiscal
policies were critical to sustaining economic growth and investor confidence,
such policies must be supplemented with structural reforms, taking into account
their short-term implications on the economy.

Mr Mike Nyinaku, the
Chief Executive Officer (CEO) of BEIGE Capital, called for the creation of
Ghanaian-owned economy where at least 40 per cent of Gross Domestic Product is
derived from economic activities of businesses of Ghanaian-ownership.

He said it was
normal to expect most of the small and medium enterprises in any country to be
owned and run by natives, however, there’s also an emerging trend where natives
are beginning to own respectable shares in multi-national companies operating
in their respective countries.

Mrs Edith Dankwa, the
CEO of Business & Financial Times, said coming from the battering of a
three-year energy crisis, hyper-inflation, the most depreciating currency on
the continent and heavy borrowing by government, Ghana was now in a mixed zone
of pessimism and optimism.

“With the
International Monetary Fund stabilising the currency and putting in place
measures for growth which include the taming of the twin-deficits, Ghana is not
only poised for stability but sustained growth,” she said.


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