The Bank of Ghana (BoG) has dragged the directors of 30 microfinance companies to the Economic and Organised Crime Office (EOCO) for investigations and prosecution for alleged embezzlement and fraud.
The names of the companies are being withheld for security reasons.
Among other things, the anti-graft agency will investigate how more than GH¢90 million belonging to depositors was utilised by the microfinance companies.
A highly placed source at EOCO stated on condition of anonymity that more than 4,500 customers risked losing their lifetime savings to the stumbling microfinance companies.
Many microfinance companies have, in the last few months, shut down their operations because of their inability to raise money to fund withdrawals.
The fate of thousands of customers whose lifetime savings are locked up remains uncertain, as some directors of the distressed companies are said to have gone into hiding.
Checks by the Daily Graphic into the operations of some microfinance companies showed that out of the 347 licensed companies, only 319 were in good standing, having fully complied with BoG regulations.
There are currently about 50 microfinance companies that are struggling to meet their liabilities to depositors.
Diversion of cash
But checks by the Daily Graphic showed a huge gap between deposits and assets, meaning that large sums of funds had been diverted into some other businesses.
The checks confirmed that several assets management and insurance companies had heavily invested in those distressed microfinance companies, a situation which had triggered the Securities and Exchange Commission (SEC) to initiate investigations.
Meanwhile, the BoG has ordered some of the microfinance companies to shut down, while others have been asked to cease taking deposits from customers.
There are yet others that have been requested by the bank to reduce the number of their offices, while the highly distressed ones have been referred to EOCO for further investigations and prosecution.
Apparently overwhelmed by the magnitude of the challenges in the microfinance sector, the Governor of the BoG, Dr Ernest Addison, said the bank had taken note of the challenges and was taking steps to address them.
In response to an email enquiry by the Daily Graphic, Dr Addison said: “The BoG has held a number of meetings with the shareholders and the management of the affected institutions to find a way forward.
“We have been monitoring microfinance institutions (MFIs) through offsite surveillance and onsite examination and, together with the government, are working on a comprehensive reform programme to address the challenges in the sector and strengthen regulatory and supervisory oversight.”
In 2015, the BoG increased the minimum paid-up capital requirement for obtaining tier two and tier three microfinance institution licences from GH¢1 million to GH¢2 million.
The increase was part of a review to strengthen microfinance institutions to deliver financial integration to the unbanked segment of the market.
Scandals and fraud
But after two years the wave of scandals, fraud and embezzlement in some microfinance companies is unsettling the authorities at the central bank, who plan to undertake a comprehensive review of the sector to sanitise the industry.
The Head of the Other Financial Institutions Services Department (OFISD) of the BoG, Mr Kofi Amoa-Awuah, said the central bank had suspended issuing fresh licences for microfinance operations.
He said viable but distressed microfinance companies had been ordered to close loss-making branches and cease giving out fresh loans.
“We are also containing the problem by closing down loss-making companies and those that require further investigations have been forwarded to EOCO,” he said.