Microfinance Apex Bank proposed

Speedy establishment of a Microfinance Apex Bank has been proposed to bolster the microfinance sector, critical for poverty reduction through financial empowerment of low-income people.

The Microfinance Apex Bank can be set up along the lines of the ARB Apex Bank with all umbrella microfinance bodies having a stake in its ownership together with government.

It could be best positioned as a public-private venture also involving other interested bodies and individual collaborators in the public and private sectors.

Such a bank will constitute the forum that can help improve on policies and develop networking strategies through collaboration with microcredit bodies, Ministries, Departments and Agencies, development partners, the Central Bank, Ministry of Finance and Economic Planning, and other apex bodies of microfinance associations.

Mrs. Felicity Acquah, former Managing Director of Eximguaranty Company (Gh) Limited, made this proposal at the fourth annual AngloGold Ashanti (Ghana) Business in Africa lecture under the topic: Microfinance: Its Evolutions and Impact on the Economic Development and Growth of Emerging Economics Over the Past Three Decades -- Lessons for Africa and Ghana.

The annual lecture was held in collaboration with the Institute of African Studies and brought together stakeholders from the financial sector, mining industry, government officials, academia and private sector operators to deliberate on the positives of the microfinance industry in the country’s non-banking financial sector.

Delivering this year’s lecture, Mrs. Acquah said: “The challenge remains for policymakers in most African countries, particularly in Ghana, to promote the establishment of an Apex Microfinance Bank to exemplify policies, best practices and standards for the industry.

“The application of such practices will trickle down to impact positively on business growth, employment, education, housing, health and productivity generally in the country.”

She indicated that government must ensure that the large informal sector is properly defined and structured in order to make future policies more relevant, and guide microfinance operations in the country and other African countries over the next decade.

She observed that policymakers recognise that poor and low-income persons have skills which remain unutilised or underutilised.

“Poverty is not created by the poor; it is created by the institutions and policies which surround them.

“In order to eliminate poverty, we need to make appropriate changes in the policies and institutions we have and also create new ones.

“Charity is not an answer to poverty; it only helps poverty to continue, and it creates dependency and takes away the individual’s initiative to break through the wall of poverty. Unleashing of energy and creativity in each human being is the answer to poverty,” she remarked.

The Bank of Ghana has recognised the major impact of microfinance on the economy by providing for its operations under the Non-Bank Financial Institutions Act, 2008 (Act 774).

Currently, there are over 228 licensed institutions contributing combined capital of over GH¢407 million.

The Ghana Association of Microfinance Institutions, however, estimates that there could be over 1,000 microfinance institutions in the country. There are more than 560 members across the 10 regions that offer both lending and deposit products to their clients.

According to data from the association, about 198 applications were submitted on behalf of its members to the Central Bank, and out of this, 77 had received their final licences, with 134 issued with provisional licenses as at August this year.

However, more than 30 microfinance institutions in the country collapsed in the first quarter of this year as a result of their inability to sustain their operations. Customers with huge deposits with those institutions could not get a refund as the owners could not be traced, or where they were traced, they failed to raise the requisite funds to pay the customers.