Feature Article of Tuesday, 21 July 2015
Columnist: Owusu, Stephen Atta
Micro finance companies are being established almost on a daily basis in Ghana. There are some who go through the right procedure to register. Others operate for a very long time before considering any registration for their companies. The Banking Supervision Department of the Bank of Ghana states that no person, other than a corporate body, incorporated in Ghana shall be eligible to apply for a license to carry out aspects of the microfinance business. This is due to the fraudulent ways most of them operate. The attitudes and behaviour of operators is in clear contrast to the meaning and definition of micro finance. It is the provision of financial services to low-income people. It refers to a movement that ensures a world where low income earners and their households have a permanent access to high quality financial service to finance income generating activities, build assets, stabilize consumption and protect risks. Micro finance was originally referred to as micro credit which offered small loans to non-salaried people with or without collateral. The term gradually changed to micro finance because it diversified to include more financial products like susu, savings, payments and remittances.
Since the fraudulent practices of certain micro finance operations are generally known, one wonders why people keep on trooping to these companies. The answer is not far-fetched. Many micro finance companies deliberately charge low interest rates and some of them entice customers to open an account with them and receive wax prints. The low interest rate that some microfinance companies purport to charge, sometimes as little as five or eight per cent, is a calculated gimmick that has caused many unsuspecting clients more harm than good. Several newspapers and magazines have written to establish this fact and the tricks of these companies whose sole intention is to dupe customers.
This fraudulent practice is contrary to the wishes of the Bank of Ghana as well as the World Bank and other donor agencies that lend billions of dollars to enable microfinance service providers dish out soft economic empowerment loans to customers. At a point in time, some clients regretted joining the micro finance schemes. They often talk about what had at first seemed a good prospect of extricating themselves from abject poverty, but ended in misery after losing all their savings and valuable property.
It is important to stress once again that mostly low income earners are the targets of micro finance companies. They are easily lured and it does not take long for them to become victims who are duped by these micro finance companies due to the customers own gullibility, carelessness and ignorance. Many have lost to these fraudulent companies amounts between GHc15,000 and GHc50,000. The directors withdraw every amount of money the company has and disappear and are heard of no more. They register all their assets in other people’s name so none of their properties could be confiscated.
One interesting thing is that these micro finance companies make big time advertisements on both radio and television. Their names should tell every wise and smart person that they are not genuine. Hear some of the names: Be Smart Micro finance, Trustworthy Micro finance, Risk-free Microfinance, Why worry Microfinance and many interesting and suspicious names.
More than thirty micro finance companies have collapsed in Ghana. The operators either wound up the business or stopped operating only to disappear into thin air. No accountability whatsoever! Sometimes these companies genuinely collapse due to insufficient support capital leading to their inability to sustain their operations. When it happens like this, customers with big deposits weep bitterly and uncontrollably because they will never ever be able to get their monies back since the owners are nowhere to be found. Even when they are found, they fail to refund the monies to the customers. They would rather prefer to go to jail and come back to enjoy the millions they have stolen from their customers.
It may seem that in Ghana, about 60% of micro finance companies are established mainly to dupe unsuspecting clients, especially market women, shop owners, fitters and local businesses and people with low education. These groups of people are always harassed by the workers of micro finance institutions. Since these groups of people hardly understand what low or high interests mean, the companies exploit their ignorance to cheat them. When an investigative team recently interviewed some customers, it was able to identify several hidden costs that, together, resulted in the borrowers paying more than they had bargained for. They also talked about constant harassment by officials from the microfinance companies if they failed to honour their repayment schedules.
Most of the micro finance companies are just in the country for very suspicious and diabolic agenda. It is therefore not surprising to see everybody rushing to set up one. A very close friend, who should have known better, fell victim to one of them and his valuable assets have been confiscated. He couldn’t finish repaying. An investigative team from Herald Tribune came across a room filled with electronic systems like TV, CD players, DVD players, sewing machines, refrigerators and many other items seized from those clients who could not pay their loans.
Beloved Ghanaians, shine your eyes! Indeed many have regretted taking loans from micro finance companies.
The onus of responsibility falls squarely on the Bank of Ghana (BoG) to weed out unregistered and suspicious micro finance companies from the system and forestall their operations in the country. I have the feeling that any group of persons that wants to establish a micro finance company must be made to deposit at least GHC5 million so that in case the owners bolt with the customers’ money, Bank of Ghana can come in and refund the victims’ monies to them. If you are not sure of the genuineness of a micro finance company, stay away.
Written by Stephen Atta Owusu
Author: Dark Faces at Crossroads