After a series of agitations, customers of some of the microfinance companies in the Brong Ahafo Region can now heave a sigh of relief as the Bank of Ghana (BoG) has now taken a firm decision to ensure that their deposits, which have been locked up in the companies, are paid.
The central bank has now decided to liquidate the assets of two of the microfinance companies and use the proceeds to pay the deposits of the customers.
The companies are the DKM Microfinance Company and Jasta Motors.
The central bank is taking steps to appoint an official liquidator to begin the process of liquidation.
At a public forum in Sunyani yesterday to discuss issues affecting microfinance companies in the Brong Ahafo Region, officials of the central bank asked the affected customers to exercise patience and allow the regulator to find a way of paying back their deposits.
The customers are demanding the payment of their deposits from the microfinance companies.
At the forum, the Head of the Bank Supervision Department of the BoG, Mr Raymond Amanfu, said most of the microfinance companies had no operating licences so their assets had been frozen.
The forum was attended by some traditional rulers and customers of the affected companies.
There was heavy security presence as the detained directors of some the companies were brought to the forum and later sent away.
At the open forum, most of the questions centred on how the affected customers were going to get their deposits paid to them.
Mr Amanfu said the BOG was doing all it could to ensure that customers’ deposits were refunded to them hence the decision to liquidate the companies’ assets and repay customers’ deposits to them.
The forum was necessitated by series of agitations by customers of some microfinance companies who have been demanding the payment of the deposits they had lodged with the companies.
In the wake of the agitations, the central bank revoked the licences of 70 microfinance companies in the country to, among others, sanitise the banking system.
Banking experts say that microfinance schemes, if not properly regulated, will operate like Ponzi schemes that lock up the capital of depositors.
“Sometimes they become scams in which the gullible public is enticed with the promise of very high returns in a very short time, but are based on paying off the early investors with the cash from (hopefully, the ever-increasing number of) new investors. The whole structure collapses when the cash outflow exceeds the cash inflow,” they said.
The originators of the scheme, however, usually disappear with large sums a few days before the crash.
Named after Charles Ponzi (1882-1949), an Italian immigrant to the US who, during 1919-20, collected more than $15 million from some 40,000 eager people by promising to double their investment in 90 days but was unable to do so.
DKM Microfinance
Addressing the opening session, Mr Amanfu explained that DKM Microfinance was given a licence on October 25, 2013, to operate and started submitting reports to the central bank from June 2014.
Later, the regulator observed that the microfinance had recorded an increase in its deposits — a development which prompted the BoG to investigate it.
During the initial investigation, the bank observed that DKM Microfinance Company was paying an interest rate of 30 per cent every three months and, therefore, advised it to reduce the rate to 17 per cent.
Fun clubs
He said further investigations conducted by the central bank revealed that some of the fun clubs which had sprung up in parts of the Brong Ahafo Region were related to DKM Microfinance Company.
“We sent external auditors to audit the company and collected monies from the Sunyani, Bolgatanga, Wa, Berekum and Wenchi branches of the company and sent them to the BOG after counting the monies in the presence of management of the company”, he explained.
Government
Mr Amanfu denied reports that the government had collected money from the company to finance development projects, saying “It is not true that government has taken the money for development projects”.
Touching on the issue of God Is Love Fun Club, he said the case was before the court and had been adjourned to January 29, 2016.
On Perfect Edge Company, he said the company had no operating licence but the BoG could not trace it. He said it was after the company’s account was frozen that the management appeared.
He added that it was found out that Jasta Motors was operating as a hire-purchase company so its account was not frozen.
Political parties
The government and the opposition New Patriotic Party (NPP) in the Brong Ahafo Region are engaged in a blame game over the operations of microfinance companies in the region.
The situation compelled the NPP Members of Parliament (MPs) from the region to call for the arrest and prosecution of directors of fraudulent microfinance institutions and fan clubs whose fraudulent operations in the region had robbed the people of their lifetime savings.
Meanwhile some officials of the microfinance companies have been arrested and arraigned.
Three persons arrested by the Bureau of National Investigations (BNI) in connection with the operation of some microfinance companies have been put before the Accra Circuit Court.
They are Monica Afriyie, Chief Executive Officer (CEO) of God Is Love Fun Club; Nortey Noel, a businessman who is also an associate of Monica and Charles Asum, the founder of Jasta Motors and Investment Company.
A fourth accused person, Martin K. Dele, the Director of DKM Diamond Microfinance Company, has also been arrested.
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