Microfinance companies in Ghana have been advised to consider merging or risk being collapsed.
The Bank of Ghana has raised the minimum capital requirement for financial institutions operating in the country.
With regards to microfinance institutions, each of the over 300 institutions are supposed to raise GHc2 million before the end of 2018 or risk being wiped out of business.
Speaking at a seminar for microfinance companies on mergers and acquisition, Project Manager of Microfinance Companies Capacity Improvement Project (MCCIP), Ernest S. Dzandu, encouraged the institutions to merge to help safeguard deposits and jobs.
“The microfinance companies who we work for through MICCIP are required to have a minimum capital of about two million Ghana cedis. A number of them will not be able to meet it and one option that is talked about always is mergers. But we realized that it’s not just about merging.”
“If you have three or four struggling companies and you ask them to merge, they are merging their struggle, that doesn’t solve any problem. So we wanted to meet with them and explain to them what mergers are, and what to look out for and any other option to look out for,” Dzandu added in a Citi News interview after the session.
So far about seven indigenous banks have collapsed in the last twelve months because according to the central bank whereas some were “deeply insolvent” others used suspicious means to acquire their licenses.
Some of the banks are also considering mergers to meet a GHc400 million new minimum capital requirement set by the central bank.
Mr. Dzandu explained that the seminar held on Thursday, August 16, 2018, was to explain the options available to the microfinance institutions to help purge themselves ahead of the deadline set by the Bank of Ghana.
“Whether the bank’s case can happen in the microfinance sector, it is a difficult thing to say. Just as there are strong banks and weak banks, same applies in the microfinance sector. We are talking about over 300 microfinance companies, and if the data available to us is anything to go by, the number that is not meeting the capital requirement is so huge.”
“It doesn’t mean it cannot be done. It means that there needs to be a lot of thought to merge them. There are voluntary mergers. Those that cannot merge my fear is that eventually, they will collapse. But when that happens, there will be loss of jobs,” he added.
Microfinance companies ready to merge
Also speaking to Citi News, Executive Secretary of the Ghana Association of Microfinance Companies, Joseph Donkor, welcomed the call saying his members are making frantic efforts to recapitalize.
“Merging is like a marriage. You need to find suitable partners that are compatible with you in terms of what you want to do. And our hope is that this programme will help our members to identify some of the other institutions they can merge with. We have already conducted some research and some of them expressed to either merge or be acquired. So based on that we are organizing this programme to bring them closer to start the talk and also the process to see how best to bring some of these things into fruition,” he added.
About MICCIP
Microfinance Companies Capacity Improvement Project (MCCIP) is a programme which begun in October 2015, and it is expected to end in February 2019.
It is aimed at helping to improve significantly the general performance of microfinance companies in Ghana through engagements, training and capacity building sessions.
It also seeks to empower the microfinance secretariat.
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By: Godwin Akweiteh Allotey/citinewsroom.com/Ghana
Follow @AlloteyGodwin
