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BoG should raise capital for micro finance companies – DG Capital CEO
 
Posted on: 07-Jun-2013         Source: myjoyonline.com
 
 
 
Some players in the Micro Finance industry are calling for an upward review of the capital requirement for setting up a Micro finance company.

The Central Bank currently puts the amount at 100,000 cedis; as a start-up, and also every branch expansion cost an additional 100,000 cedis. But proponents of the increase say the amount is meager and cannot cushion the companies.

The proponents believe an upward review will minimize situations where some micro finance companies close down after running bankrupt. Recently, ROGAI Micro Finance in Takoradi folded up and is believed to have bolted with clients’ savings running into thousands of Ghana cedis.

The Chief Executive Officer of DG-Capital, a fast growing micro-finance company with three branches in Accra and one in Takoradi in just two years, Kwesi Tarko Junior, told Maxx Business the industry could face serious challenges if the capital requirement remains unchanged.

“The Capital requirement is vital because with 100,000, if I have about ten friends, they can all raise 10,000 each and we start a micro finance company. So the amount is a bit low. If the capital is probably raised to about 500,000 cedis, then we will have more serious people coming into this industry. Currently we have over seventy fully licensed micro finance institutions, and those that have provisional license one can’t even place a number on them. So I believe that if the capital requirement is tightened, the industry will see some level of respect” he remarked.

“Then the situations where companies come in and bolt with peoples’ savings and all that will stop. So if due diligence is done to this entire process, the industry will really thrive. But the way it is now, if something radical is not done about it, the industry will be threatened “he cautioned.

He however noted that the Central Bank was on course in its efforts to ensure sanity in the sector although it could do more. "

“I must say that we at DG-Capital didn’t start with so much money but we were determined so we did things that we didn’t get stuck. Some of these companies come to you and promise to give you unrealistic interest rates. It will take the Bank of Ghana sometime to be able to arrest the situation. So we shouldn’t blame the regulator for now because I believe they are doing a very good job. Those of us who have the licenses now will really survive” he noted.

A Micro Finance consultant is also backing calls for a review in the capital requirement. The CEO of GESRO, a leading Credit Union in Takoradi, Mr. Kusi Boachie Yiadom, told Maxx Business that many micro finance institutions often start with no money to lend, beyond the 100,000 capital requirement, a chunk of which is spent on office set up, and are thus compelled to lend with client’s deposits which lands them in trouble.