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The Central Bank of Ghana has introduced a new set of business regulations and corresponding sanctions to effectively regulate the microfinance industry.
Limits of risk management and effective corporate governance practices are outlined in the sixty-six-page document.
It also emphasises the need for boards of the companies to act collectively with management to put some orderliness in their operations.
Banking Consultant with the Osei Tutu II Centre for Executive Education and Research, Nana Otuo-Acheampong, indicates injecting governance practices into the guidelines is appropriate.
The regulator has also launched a Logo to distinguish between credible, licensed microfinance institutions and unlicensed ones.
“They did it for the Forex Bureau and it brought stability in that sector so we felt that when we have that common logo, people can have the confidence to work with us,” says Chairman of Ghana Association of Micro-Finance Companies, Collins Amankwah.
The move is meant to prevent a repeat of 2011 unfortunate episodes where many of such institutions folded up due to operational mishaps.
At the launch of the business regulations and logo in Kumasi, Head of other Financial Services Department at the Bank of Ghana, Kofi Amowua told Luv Biz the sanctions are limited to monitoring sanctions.
“Your returns must come in timely; if you submit late, or inaccurate returns, you will pay some fine. You must make prudential requirements and operate soundly,” he said.
Again, if the company does not meet the requirement or capital adequacy, plus if inadequate provisions are made for loans, sanctions will be applied.
“If we see that a member is going contrary to the guidelines we will be the first to report the member to Bank of Ghana.”