The Bank of Ghana (BoG) has requested Parliament to pass the Deposit Insurance Law that will ensure that customers’ money deposited at financial institutions are protected.
According to the bank, the deposit insurance law had become necessary due to failing financial institutions in the country recently.
Many depositors lost their monies when some micro-finance institutions closed down because they were unable to meet depositor’s withdrawals due to high interest on deposits.
The Central Bank last week also revoked licenses of some 70 micro-finance and money lending companies for failing to meet all the requirements to be given the final approval to operate.
Millison Narh, First Deputy Governor of Bank of Ghana (BoG) at a press conference in Accra last week Friday, said “If we have had deposit insurance, depositors would be duly catered for when some of these institutions are failing”.
He revealed that the Deposit Insurance Law has just been sent to Parliament for passage.
“In the current situation we don’t have any probable failing institutions. We are hopeful that this year that law would be passed so that the Central Bank would have the necessary environment to protect depositors’ money,” Narh said.
Reviewing Micro-finance Institutions
The Deputy Governor revealed that the Central Bank is reviewing the entire process of licensing new micro-finance institutions and that all regional offices of the bank are being resourced with staff to improve surveillance to intensify its intelligence network.
He said the bank intends to improve collaboration with law enforcement agencies to deal swiftly with illegal financial service providers and intensify public education on financial literacy to avoid mis-communication.
Licensing Of Microfinance Institution
The Deputy Governor said prior to the licensing of every microfinance institution, the applicant is expected to go through two stages of licensing in accordance with Sections 5 and 6 of the Banking Act, 2014 (Act 673) as amended and non-bank financial institutions Act, 2008 (Act 774) respectively.
He said the first stage of licensing include submission of an application accompanied by a certified true copy of the certificate of incorporation and company regulations, a business plan indicating five-year financial projections.
The granting of an approval in principle is not a license to operate as a microfinance company but it is a letter issued to the applicant to fulfill certain conditions to enable the Bank of Ghana issue a license to operate, Mr Narh said.
Revoking of Licenses
He said the licenses of 70 microfinance institutions were revoked because they failed to comply with the requirements of the bank.
Mr Narh said the affected microfinance institutions had not been issued with a final approval and license to operate, stressing that approval in principle expires after six months.
He noted that the accounts of these companies, which were frozen, are held by some universal banks and that none of such monies are with the Bank of Ghana as being rumored.
Currently, there are 546 microfinance institutions, comprising 468 microfinance companies, 67 money lending companies and 11 financial non-governmental organizations while 92 institutions are waiting the fulfillment of final approval requirements.
By Cephas Larbi