GAPNEWS
14 answers on why BoG revoked licenses of 347 insolvent microfinance institutions
1. Why is the Bank of Ghana undertaking this particular action?
Answer: Over the years, the Bank of Ghana notified these institutions of
regulatory violations, deficiencies, and vulnerabilities which had been identified
through off-site reviews and onsite examinations. Unfortunately, efforts by the
Bank of Ghana to get the affected institutions and their shareholders and
directors to rectify these deficiencies yielded no results. Consequently, the
financial position of these institutions continued to deteriorate, leading to their
insolvency with majority of them ceasing operations and closing their offices with
depositors’ funds locked up. Even those that have not closed their offices are
unable to pay their depositors. This has placed a substantial amount of
depositors’ funds at risk. Given the risks that these institutions continue to pose
to the entire financial system, and the need to protect depositors, the Bank of
Ghana is sanitizing this sector through the orderly resolution of the failed
institutions in accordance with the provisions of the Banks and Specialised
Deposit-Taking Institutions Act, 2016 (Act 930), and the Non-Bank Financial
Institutions Act, 2008 (Act 774).
2. Why is the Bank of Ghana taking this action now?
Answer: Insolvent financial institutions threaten the stability of and undermine
confidence in the entire financial system. The Bank of Ghana has taken action
against the affected institutions after giving them ample opportunity to recover
from insolvency and to address other identified supervisory concerns. The Bank
of Ghana also had to wait for the Government of Ghana to provide funds needed
to compensate depositors of failed microfinance companies.
3. Which institutions are involved and how many are to be
closed down?
Answer: A total of 347 microfinance companies have had their licences revoked,
comprising 155 insolvent institutions that have already ceased operations, and
192 other insolvent ones. In addition, the licences of 39 microcredit companies
(also known as money lenders) have been revoked, comprising 10 of such
companies that are insolvent and have ceased operations, as well as 29 other
insolvent ones.
4. Was there no other way of helping these institutions to
survive instead of closing them down completely?
Answer: Prior to the revocation of their licences, the Bank of Ghana gave the
Owners/Management of these institutions several opportunities as provided by
law to take steps to rectify the identified regulatory violations and other
supervisory concerns raised by the Bank of Ghana. The institutions whose
licences have been revoked, however, failed to take steps to address their
insolvency and other relevant issues. As mentioned above, a significant number
of these institutions had already ceased operations and had locked up their
offices, denying their customers of access to their funds in contravention of
relevant laws. To ensure their orderly exit, and to protect the public and the
financial system from further dealings with these institutions, the Bank of Ghana
has revoked their licences.
5. What happened next, after the licences have been revoked?
Will the institutions whose licences have been revoked be
able to continue to operate as going concerns?
Answer: Following the revocation of licences of the affected institutions, they are
no longer authorized to conduct microfinance or microcredit business. The
affected institutions will be wound up in accordance with relevant laws. In the
case of the 347 microfinance companies, the Bank of Ghana has appointed a
Receiver in the person of Mr. Eric Nipah of PWC to see to their orderly winding
up pursuant to the provisions of Banks and Specialized Deposit-Taking
Institutions Act, 2016 (Act 930). In the case of the 39 microcredit companies
(money lenders), the Bank of Ghana has notified the Registrar of Companies at
the Registrar General’s Department of the revocation of their licences, and has
requested that the Registrar commence winding-up proceedings against these
companies under relevant laws.
6. When and where will depositors of these institutions be able
to receive their money?
Answer: The Government has made available funds to enable the Receiver pay
depositors of the 347 microfinance companies after validation of their claims.
Other creditors of the failed institutions will be settled by the Receiver in line with
the hierarchy of creditors’ claims set out under Act 930. The Receiver will in due
course make an announcement with regards to when and where payments will
be made. The Receiver will also indicate documents required from depositors to
facilitate the validation of claims and orderly payment of depositors and other
creditors.
7. What happens to other creditors, aside depositors, and the
counterparties who may have other agreements with these
institutions?
Answer: The Receiver will register, verify, and validate claims from all creditors
of microfinance institutions. Validated claims will be paid in accordance by the
Receiver in accordance with the priority of payments set out in sections 135 of
the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930).
8. What should l do if my name is not captured in the books of
the specified institutions?
Answer: Any depositor whose name is not captured in the records of the affected
institution can still present proof of deposit in their possession to the Receiver for
validation. Once it has been properly validated, you will be paid in accordance
with the arrangements set out in point 7 above.
9. Is it still safe to do business with microfinance companies
and microcredit companies?
Answer: Yes, it is still safe to do business with microfinance companies and micro
credit companies whose licences have not been revoked. There are now 137
microfinance companies and 31 microcredit companies whose licences have not
been revoked given that they are in good standing with the Bank of Ghana’s
regulatory requirements. A list of institutions in good standing is available on the
Bank of Ghana’s website.
10. Who is the Receiver and what is he expected to do?
Answer: The Receiver is Mr. Eric Nipah of PricewaterhouseCoopers (PwC). He is
required by law to take control over all 347 microfinance companies for which he
was appointed and to see to the orderly winding up of the affected institutions in
line with sections 123-139 of the Banks and Specialized Deposit-Taking
Institutions Act, 2016 (Act 930). Working under the supervision of the Bank of
Ghana, he will realise any remaining assets of the affected companies and pay
out claims of these companies that are verified.
11. What about the 39 micro credit companies? Who will
see to their winding up?
Answer: The Bank of Ghana has notified the Registrar of Companies (Registrar
General’s Department) of the revocation of the licences of the 39 micro credit
companies and has requested the Registrar to commence winding-up
proceedings against these companies. These microcredit companies were
licensed by the Bank of Ghana under the Non-Bank Financial Institutions Act,
2008 (Act 774) as non-deposit taking institutions. Act 774 does not provide for
receivership proceedings unlike Act 930 which regulate deposit-taking institutions
like the microfinance institutions. The Bank of Ghana therefore expects the
Registrar of Companies to initiate winding-up against these institutions under the
Companies Act, 1963 (Act 179) and the Bodies Corporate (Official Liquidations)
Act, 1963 (Act 180).
12. Will there be job losses now that these institutions
have been closed?
Answer: More than 200 (two Hundred) of the affected institutions had already
ceased operations on their own before their licences were revoked. As a result,
they have no employees currently and there will be no job losses from the
revocation of their licences, per records available to Bank of Ghana. Even for the
insolvent institutions that had not ceased operations, the Bank of Ghana does
not anticipate a lot of job losses as many of them had downsized their
operations.
13. Will this affect the Bank of Ghana’s financial inclusion
agenda, given that most of the affected institutions operated
in areas that had limited access to the services of
mainstream financial institutions?
Answer: We do not expect this to affect the financial inclusion agenda. While
these institutions were licensed to promote the financial inclusion agenda, the
majority of them veered off their mandate and rather pursued their own agenda
of obtaining funds from retail and institutional sources and providing loans at
prohibitively high costs as well as diverting much of the funds they obtained to
their private ventures. Secondly, weak capitalization of these institutions from
the onset, and poorly governance made them vulnerable and unsustainable and
unable to help promote the financial inclusion agenda objective of the Bank of
Ghana. The lessons learned include the fact that weak financial institutions
cannot help promote financial inclusion. The Bank of Ghana’s clean-up exercise
should rather help build-up trust and improve access to financial services by all.
14. What happens to the owners, directors and
shareholders of these affected institutions?
Answer: Any persons found to have contributed to the failures of these
institutions will be reported to the law enforcement agencies for further action
including possible prosecution where necessary.
Also, the Receiver will institute civil actions against relevant persons to claim
damages and restitution where necessary
14 answers on why BoG revoked licenses of 347 insolvent microfinance institutions
Answer: Over the years, the Bank of Ghana notified these institutions of
regulatory violations, deficiencies, and vulnerabilities which had been identified
through off-site reviews and onsite examinations. Unfortunately, efforts by the
Bank of Ghana to get the affected institutions and their shareholders and
directors to rectify these deficiencies yielded no results. Consequently, the
financial position of these institutions continued to deteriorate, leading to their
insolvency with majority of them ceasing operations and closing their offices with
depositors’ funds locked up. Even those that have not closed their offices are
unable to pay their depositors. This has placed a substantial amount of
depositors’ funds at risk. Given the risks that these institutions continue to pose
to the entire financial system, and the need to protect depositors, the Bank of
Ghana is sanitizing this sector through the orderly resolution of the failed
institutions in accordance with the provisions of the Banks and Specialised
Deposit-Taking Institutions Act, 2016 (Act 930), and the Non-Bank Financial
Institutions Act, 2008 (Act 774).
2. Why is the Bank of Ghana taking this action now?
Answer: Insolvent financial institutions threaten the stability of and undermine
confidence in the entire financial system. The Bank of Ghana has taken action
against the affected institutions after giving them ample opportunity to recover
from insolvency and to address other identified supervisory concerns. The Bank
of Ghana also had to wait for the Government of Ghana to provide funds needed
to compensate depositors of failed microfinance companies.
3. Which institutions are involved and how many are to be
closed down?
Answer: A total of 347 microfinance companies have had their licences revoked,
comprising 155 insolvent institutions that have already ceased operations, and
192 other insolvent ones. In addition, the licences of 39 microcredit companies
(also known as money lenders) have been revoked, comprising 10 of such
companies that are insolvent and have ceased operations, as well as 29 other
insolvent ones.
4. Was there no other way of helping these institutions to
survive instead of closing them down completely?
Answer: Prior to the revocation of their licences, the Bank of Ghana gave the
Owners/Management of these institutions several opportunities as provided by
law to take steps to rectify the identified regulatory violations and other
supervisory concerns raised by the Bank of Ghana. The institutions whose
licences have been revoked, however, failed to take steps to address their
insolvency and other relevant issues. As mentioned above, a significant number
of these institutions had already ceased operations and had locked up their
offices, denying their customers of access to their funds in contravention of
relevant laws. To ensure their orderly exit, and to protect the public and the
financial system from further dealings with these institutions, the Bank of Ghana
has revoked their licences.
5. What happened next, after the licences have been revoked?
Will the institutions whose licences have been revoked be
able to continue to operate as going concerns?
Answer: Following the revocation of licences of the affected institutions, they are
no longer authorized to conduct microfinance or microcredit business. The
affected institutions will be wound up in accordance with relevant laws. In the
case of the 347 microfinance companies, the Bank of Ghana has appointed a
Receiver in the person of Mr. Eric Nipah of PWC to see to their orderly winding
up pursuant to the provisions of Banks and Specialized Deposit-Taking
Institutions Act, 2016 (Act 930). In the case of the 39 microcredit companies
(money lenders), the Bank of Ghana has notified the Registrar of Companies at
the Registrar General’s Department of the revocation of their licences, and has
requested that the Registrar commence winding-up proceedings against these
companies under relevant laws.
6. When and where will depositors of these institutions be able
to receive their money?
Answer: The Government has made available funds to enable the Receiver pay
depositors of the 347 microfinance companies after validation of their claims.
Other creditors of the failed institutions will be settled by the Receiver in line with
the hierarchy of creditors’ claims set out under Act 930. The Receiver will in due
course make an announcement with regards to when and where payments will
be made. The Receiver will also indicate documents required from depositors to
facilitate the validation of claims and orderly payment of depositors and other
creditors.
7. What happens to other creditors, aside depositors, and the
counterparties who may have other agreements with these
institutions?
Answer: The Receiver will register, verify, and validate claims from all creditors
of microfinance institutions. Validated claims will be paid in accordance by the
Receiver in accordance with the priority of payments set out in sections 135 of
the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930).
8. What should l do if my name is not captured in the books of
the specified institutions?
Answer: Any depositor whose name is not captured in the records of the affected
institution can still present proof of deposit in their possession to the Receiver for
validation. Once it has been properly validated, you will be paid in accordance
with the arrangements set out in point 7 above.
9. Is it still safe to do business with microfinance companies
and microcredit companies?
Answer: Yes, it is still safe to do business with microfinance companies and micro
credit companies whose licences have not been revoked. There are now 137
microfinance companies and 31 microcredit companies whose licences have not
been revoked given that they are in good standing with the Bank of Ghana’s
regulatory requirements. A list of institutions in good standing is available on the
Bank of Ghana’s website.
10. Who is the Receiver and what is he expected to do?
Answer: The Receiver is Mr. Eric Nipah of PricewaterhouseCoopers (PwC). He is
required by law to take control over all 347 microfinance companies for which he
was appointed and to see to the orderly winding up of the affected institutions in
line with sections 123-139 of the Banks and Specialized Deposit-Taking
Institutions Act, 2016 (Act 930). Working under the supervision of the Bank of
Ghana, he will realise any remaining assets of the affected companies and pay
out claims of these companies that are verified.
11. What about the 39 micro credit companies? Who will
see to their winding up?
Answer: The Bank of Ghana has notified the Registrar of Companies (Registrar
General’s Department) of the revocation of the licences of the 39 micro credit
companies and has requested the Registrar to commence winding-up
proceedings against these companies. These microcredit companies were
licensed by the Bank of Ghana under the Non-Bank Financial Institutions Act,
2008 (Act 774) as non-deposit taking institutions. Act 774 does not provide for
receivership proceedings unlike Act 930 which regulate deposit-taking institutions
like the microfinance institutions. The Bank of Ghana therefore expects the
Registrar of Companies to initiate winding-up against these institutions under the
Companies Act, 1963 (Act 179) and the Bodies Corporate (Official Liquidations)
Act, 1963 (Act 180).
12. Will there be job losses now that these institutions
have been closed?
Answer: More than 200 (two Hundred) of the affected institutions had already
ceased operations on their own before their licences were revoked. As a result,
they have no employees currently and there will be no job losses from the
revocation of their licences, per records available to Bank of Ghana. Even for the
insolvent institutions that had not ceased operations, the Bank of Ghana does
not anticipate a lot of job losses as many of them had downsized their
operations.
13. Will this affect the Bank of Ghana’s financial inclusion
agenda, given that most of the affected institutions operated
in areas that had limited access to the services of
mainstream financial institutions?
Answer: We do not expect this to affect the financial inclusion agenda. While
these institutions were licensed to promote the financial inclusion agenda, the
majority of them veered off their mandate and rather pursued their own agenda
of obtaining funds from retail and institutional sources and providing loans at
prohibitively high costs as well as diverting much of the funds they obtained to
their private ventures. Secondly, weak capitalization of these institutions from
the onset, and poorly governance made them vulnerable and unsustainable and
unable to help promote the financial inclusion agenda objective of the Bank of
Ghana. The lessons learned include the fact that weak financial institutions
cannot help promote financial inclusion. The Bank of Ghana’s clean-up exercise
should rather help build-up trust and improve access to financial services by all.
14. What happens to the owners, directors and
shareholders of these affected institutions?
Answer: Any persons found to have contributed to the failures of these
institutions will be reported to the law enforcement agencies for further action
including possible prosecution where necessary.
Also, the Receiver will institute civil actions against relevant persons to claim
damages and restitution where necessary
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