ProCredit MD Calls For Tough Entry Requirements

Sarah Tsien Zetterli, Managing Director of Procredit, has called on the Bank of Ghana (BoG), its regulator, to tighten the entry requirements for microfinance institutions to avoid the proliferation of irresponsible lending. Speaking on the sidelines of a business forum organized for existing and potential customers on Tuesday, Mrs Zetterli said the microfinance sector was becoming overcrowded mainly because the barrier to entry was too low. All Tier 2 microfinance companies require not less than GH�100,000.00 as minimum paid-up capital while tier three entities must have not less than GH�60,000.00 as minimum paid-up capital as against GH�7 million needed by Savings and Loans companies as minimum capital requirement. �The market is becoming over-crowded with more and more micro finance institutions coming on board and the barrier to entry is too low and this is leading to socially irresponsible lending,� she said. �Customers are taking multiple loans from these institutions and are unable to pay and the last thing we want is to get to see SMEs indebted,� Mrs Zetterli added. She said Procredit has over the last few years shifted its focus from microenterprises to supporting small and medium enterprises, which have the capacity to employ, create job opportunities and spur economic growth. On the issue of lack of access to SMEs, Mrs Zetterli said the inability of banks and financiers to offer support was mainly because most of those enterprises did not have the information required to make informed decisions on their operations. �It is not that the financial institutions are unwilling to lend. It is because the SMEs are not ready with what we want to see when it comes to issues of mitigating credit risks. They need to have a business plan, they need to organise their financials and keep proper records,� she said. Mrs Zetterli said the companies must be able to provide basic information such as income and expenditure account, a clear ownership structure and be able to share the future outlook for the business to make for informed decision from the banks and financiers. �Small businesses need to get all these ready before coming to the financier and that is why we want to help bridge that business gap,� she said. She called for the beefing up of the credit reference bureau to weed out customers with poor credit habits and underscored Procredit commitment to the process to supply data to the bureau. �Once you have a robust database we will be able to weed out those with poor credit habits and the credit culture will get better and interest rates will be able to come down,� she said. Mrs Zetterli said Procredit goal was to become the reference point for SMEs lending and development and added that the company would construct a $10 million head office next year to demonstrate commitment to Ghanaians. �It is a huge investment for us but it is a symbol to our clients and Ghanaian society as a whole that Procredit is here to stay. We are investing heavily into the country and we want to provide a very reliable service to customers in the country. We think that Ghanaians businesses deserved tailored attention,� she added. Mrs Zetterli said the forum being held for both existing and potential clients would create a platform to exchange ideas and dialogue around the key challenges and issues that SMES are facing here in Ghana and to provide some solutions.