Microfinance institutions have appealed to the Bank of Ghana (BoG) to reconsider the implementation timeline for proposed reforms that would significantly increase minimum capital requirements for operators in the sector.
Industry players argue that while they support efforts to strengthen regulation and improve the resilience of the microfinance industry, the proposed deadline for compliance could force many institutions out of business and undermine access to financial services for underserved communities.
Under the central bank’s proposed reforms, microfinance institutions seeking to operate as Microfinance Banks will be required to raise a minimum capital of GH¢50 million by December 31, 2026. Institutions that fail to meet the threshold may be compelled to merge with other firms, seek acquisition, downgrade their licences or exit the market altogether.
Speaking at a roundtable discussion on the future of Ghana’s microfinance sector, Board Chairperson of the Ghana Association of Microfinance Companies (GAMC), Rebecca Addo, urged the central bank to adopt a more gradual implementation approach.
According to her, many operators support the reforms in principle but believe the proposed timeline does not adequately reflect the realities of the industry.
“We are asking the Bank of Ghana to consider a phased implementation framework with clear milestones that institutions can work towards over a reasonable period,” she said.
“Reforms are necessary, but businesses need sufficient time to mobilise capital and restructure their operations to meet new regulatory requirements.”
Financial inclusion concerns
Madam Addo warned that a strict implementation of the capital requirement could result in the closure of numerous microfinance institutions, particularly those operating in rural and underserved communities where traditional commercial banks have limited presence.
She noted that many microfinance firms serve as the only formal financial institutions available to residents in certain districts and regions.
“Once some companies are unable to meet the requirements and leave the system, many people who currently depend on microfinance institutions for savings, credit and other financial services could be left without access to banking services,” she explained.
“In several parts of the country, a single microfinance institution serves an entire community because larger banks do not find those areas commercially attractive.”
Industry operators fear that a significant reduction in the number of microfinance institutions could slow Ghana’s progress in expanding financial inclusion, particularly among low-income earners, small businesses and informal sector operators.
Calls for balanced regulation
Stakeholders have therefore called on regulators to strike a balance between strengthening oversight and preserving the critical role the sector plays in supporting economic activity at the grassroots level.
They argue that while stronger capital requirements can improve stability and public confidence, the reforms should be structured in a way that allows viable institutions to transition gradually without disrupting services to customers.
Concerns over foreign ownership
The roundtable also highlighted concerns about the growing role of foreign investors in Ghana’s microfinance industry.
Principal Consultant at Protage Consult, David Aguda, urged policymakers to review existing ownership rules to ensure the sector continues to contribute meaningfully to domestic economic development.
While acknowledging the importance of foreign investment, he cautioned against unrestricted foreign ownership of microfinance institutions, arguing that large-scale profit repatriation could place additional pressure on the country’s foreign exchange reserves.
“Microfinance is a highly profitable business when managed efficiently. If profits are continually repatriated, it increases demand for foreign exchange and can have implications for the wider economy,” he said.
Mr. Aguda noted that current regulations permit foreign investors to own up to 100 percent of a microfinance institution, a situation he believes warrants further review.
Industry engagement continues
The concerns come as the Bank of Ghana continues consultations with industry stakeholders on the proposed reforms, which are aimed at strengthening governance, improving capitalization and enhancing the long-term sustainability of the microfinance sector.
Stakeholders say ongoing dialogue will be critical to ensuring that reforms achieve their intended objectives without weakening the sector’s contribution to financial inclusion and small business development.
The microfinance industry remains a key component of Ghana’s financial ecosystem, providing savings, credit and other financial services to thousands of small enterprises and low-income households that often fall outside the reach of traditional banking institutions.
Source: businesspostonline
