BANK OF GHANA
TRANSCRIPT OF THE PRESS BRIEFING BY THE HEAD OF THE
OTHER FINANCIAL INSTITUTIONS SUPERVISORY DEPARTMENT
(OFISD), MR. RAYMOND AMANFU, HELD IN THE MPC
CONFERENCE ROOM, BANK OF GHANA, ON WEDNESDAY, MAY 13,
2015
TRANSCRIPT OF THE PRESS BRIEFING BY THE HEAD OF THE OTHER
FINANCIAL INSTITUTIONS SUPERVISORY DEPARTMENT (OFISD), MR.
RAYMOND AMANFU, HELD IN THE MPC CONFERENCE ROOM, BANK OF
GHANA, ON WEDNESDAY, MAY 13, 2015
Below is a transcript of the press briefing which was held on Wednesday, May 13, 2015 in the
MPC Conference Room, Bank of Ghana, with respect to public announcements by the Bank of
Ghana about a moratorium placed by the Bank on the operations of DKM Limited – a
microfinance company.
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Questioner: Can you confirm that DKM Microfinance has been shut down? Is it a
shutdown, a closure or a suspension?
Mr. Amanfu: The first questioner wanted to know about the status of DKM – whether
there was a suspension or shutdown. The law is very clear. Section 65 says that we place a
moratorium of 90 days on the operations of an institution found wanting in its operations.
That means a suspension of the company’s operations for 90 days. If we think there is the
need to extend the 90 days period we will do that. In the notice of the moratorium in the
case of dkm we gave four basic reasons why the moratorium was placed. The first one –
every licence that is issued to a microfinance comes with it guidelines and regulations or
rules for operating. If you flout the rules there are sanctions. The extreme end of the
sanctions is the moratorium. Moratorium is placed after several discussions and several
appeals to the institutions to comply failed. Number two: we also impose the moratorium
when the inactions or actions of the institutions appear to be detrimental to the safety of
depositors’ funds. That means that if in our view, the things you are doing after several
cautions are putting depositors’ money at risk we have to stop you somewhere. The third
reason on the notice of the moratorium was that they violated sections of the Banking Act in
relation to exposure to related parties. The law does not say don’t get exposed to a related
party. There are strict limits and procedures you have to adopt. If consistently and
persistently you flout it we have to take action. And finally we said you cannot operate a
financial institution and set up a subsidiary without going through the appropriate
provisions of the Act which requires certain maximum levels of investments and maximum
levels of exposure that you can give so that nobody sets up a company, a bank or a financial
institution and use that to finance other related companies. That is not allowed under the
law. So these are the basic reasons why a moratorium has been placed.
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Questioner: Does the Bank have a full number of microfinance institutions that have been
licensed against those that are operating in the country without licences?
Mr. Amanfu: It would be difficult for me to tell you the total number of microfinance
companies operating in Ghana because it is not every company that is on the BoG list. If
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somebody is operating illegally it will be difficult to determine if their operations have not
been detected. What I can give you is how many of the companies are licensed by the Bank.
I can’t give you the exact figure but the latest count is 508. That is those that have been
licensed and those that have provisional approvals but as to the number operating it may go
well beyond this as there are some who may be operating illegally.
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Questioner: What is the total amount of deposits at the moment and what are you doing
with the depositors’ money?
Mr. Amanfu: Our latest survey shows that we have close to about GHS950m as deposits
for all the microfinance institutions. DKM has close to GHS107m in deposits as at January
2015 as reported by DKM. Let me use the word advisedly. I’m not very clear about what
you meant by what we are doing with the deposits. These monies mobilized by DKM are
deployed severally – some in government papers, some in loans, some are exposures to
related parties, cash at clearing and vault, etc.
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Questioner: I spoke to you some time back about deposit insurance and you talked about a
bill that has been put in place. How far have you gone with the deposit insurance?
Mr. Amanfu: Like the Governor said the bill is currently before Parliament so we are
waiting to be invited to discuss it. The bill will cover all deposit-taking institutions if you
meet the criteria. The simple reason is that you don’t put a company that is not meeting the
prudential norms under a deposit protection scheme; you will collapse it from day one. It is
mandatory for every deposit-taking company to be a member of the deposit insurance
protection scheme. However, before you are admitted you must meet minimum criteria and
conditions. If you don’t meet the conditions then you can’t operate. What it means is that
then you have to fold up.
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Questioner: What happens to the distressed customers? This morning there was news of
some people taking loans of about GHS20,000 and investing them with DKM. What
happens to their money?
Mr. Amanfu: It is interesting to note that a customer would take a loan and invest in a
microfinance company. The question to ask is, why would anyone take a loan from a bank
and go and deposit it in a microfinance institution. Ladies and gentlemen, one of the key
challenges we had with this microfinance institution, and I think we must make it very clear
that we’ve had several discussions with them spanning over three months. It is not very
exciting to place a moratorium on the company because people would have their monies in
there. If a company is paying as high as 55% interest on savings for every two months,
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equivalent to 330% per annum, we have to ask questions. We have demanded from them
evidence of how these monies they mobilised are invested, the return on them and how
come they can pay that. Once they don’t give us that evidence then we think that as a matter
of course we must put a stop to this kind of business.
With the distressed customers, let’s make it very clear that when you place a moratorium on
the operations of a company what we have done is that we have closed the company, we
have evacuated every cash from that institution for safe keeping under dual signature of
Bank of Ghana and the authorised staff of DKM and they have evidence and they have
copies of the receipt of money that has been moved. We have taken inventory of all fixed
assets in the company, and the schedule of fixed assets information has bee signed duly by
the company and the Bank of Ghana and what we have done is that we have placed notices
for the information of the public for the first 90 days. We have to carry out an audit. We are
going to appoint auditors at the expense of the central bank to audit every transaction of the
company to come clean on how much deposit is in there and how the deposits have been
utilised. After that if we find out that the company has enough liquid assets to meet its
liabilities then the issue has nothing to do with the safety of depositors’ funds but
management practices which we would have to ensure that they do and then the company
would be opened. Where we find out that there are mismatches in the assets and liabilities
and gross understatements then we would have to start the process of liquidation and
payment of customers’ deposits in which case it can happen that if there are not enough
liquid funds our first attempt will be to pay principal deposits in terms of how much money
people have placed with DKM and do away with any interest earned. It is only when there
are extra funds after paying the principal deposits that interest earned may be paid.
•
Questioner: Why is Bank of Ghana now taking action against DKM? They have been
around for some time. Is it not too late to be taking action now?
Mr. Amanfu: It is not late to take action now as we have to engage the institution to
understand what they do and when they can no longer further explain what they do then you
have to cut the potential losses that may accrue to customers by stopping their operations.
Now what we have noticed is that this is a company we think have a role to play and so we
need to engage them and know what they do but if you cannot support how you fund your
330% per annum interest payment then we must put a stop to it at a certain point. We don’t
just get up to put a stop to a company’s operations.
•
Questioner: There may be a lot of illegal microfinance institutions operating in the
country? I want to bring your attention to Berekum where DKM operates from. There is a
fan club in Berekum called God is Love Fan Club which is also taking deposits and
investments as high an interest rate as 60%. I’m not sure whether you are aware of them but
if you are what are you doing about them?
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Mr. Amanfu: God is Love fan club is a subject in court and I think we will leave it at that.
We published their name but they think they are not taking deposits. We would be glad if
you can come and be a witness for us because we think that they are taking deposits. They
say they are not taking deposits but doing investments. As to what investment earns about
60% every two months we are not sure. The matter is before a court of competent
jurisdiction for the past three months in Kumasi. We have informed the security agencies,
and we have the FIC dealing with all others that have come to our attention and they will
deal with it appropriately.
•
Questioner: Can you please help us with the total number of depositors, the clients?
Mr. Amanfu: As I sit here I cannot provide the number of clients that the company has.
•
Questioner: The issue about the principal deposit at DKM, supposing we come to the
situation where you have to liquidate and pay out and you realise that the amount of money
that people are saying they have there is not equal to the amount of liquid cash that the
company has will the BoG pay the difference, that is bear the cost?
Mr. Amanfu: On the issue of paying out to the depositors, if the assessment is done and we
find out that there are insufficient liquid assets to meet the liabilities then we will go ahead
and appoint the liquidator. What the liquidator does is to use the liquid assets and proceeds
from the sale of any fixed assets to pay depositors. Once he does that whatever comes in
will be paid to the depositors. If such funds is insufficient everybody will be paid on prorata basis. Bank of Ghana will not pay any difference to anybody.
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Questioner: What is the time lag to complete all the work being done so that for those
depositors whose funds are locked up they can be paid? Is there more to it than this
company operating outside the banking law because we’ve sighted a letter from the
Financial Intelligence Centre which presupposes that there is something serious that the
company is doing?
Mr. Amanfu: The initial period is for 90 days because an external auditor has to be
appointed to audit the books and all these things will depend on the kind of record the
institution is keeping and the kind of cooperation they will get. If all goes well we expect
that with the appointment of the external auditor and the auditor being able to do its work
within the stipulated time of about 30 days allotted to them then the exercise should be
completed within the 90 days. Every account would have to be verified and from the initial
picks on the ground customer audits may have to be done. For instance if a person claims he
or she has money with DKM but the corresponding name is not found in the books that
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person has to provide evidence. The law says that where we have not completed work
within the 90 days and there is more work to be done, the public would have to be informed
about the likelihood of an extension of the 90-day moratorium period.
If DKM has extended facilities to companies far in excess of regulatory mandate and
blatantly refused to address the concerns of the regulator then of course we have to make
sure that all the related parties are put on the radar to look at them because if for instance
exposure has been made to the related companies and we are not getting proceeds then we
have to fall on the related companies’ assets for the debts they owe and those things are
beyond us as regulators. We don’t dictate to the FIC on what they should do. They have
also picked up certain information we don’t have and we don’t know and for that matter in
order to protect everybody the accounts of that company must remain frozen until they have
also done their checks and come out with their reasoning.
•
Questioner: I want to know what exactly is happening with the other companies because
currently it’s DKM but some time ago there were news that DG Capital and some others
were also shut down? Can you give us an update on what happened or what is happening to
them?
Mr. Amanfu: The issue of DG Capital is that when a company goes down and there are
potential investors we don’t normally want to discuss their matters this publicly.
•
Questioner: Would all these developments in the
microfinance sector inform the capital requirements that microfinance institutions have to
pay?
Mr. Amanfu: All these developments, including the challenges we are facing, are
informing a review of the guidelines and regulations, and the capital requirements of
microfinance institutions will be changed. The capital requirements will be hiked up, I can
assure you as soon as practicable. I can’t give you exact timelines as we have to do a whole
lot of exercises. When we set up the requirements there are certain thresholds of deposits
that you can’t take. For instance, if you are a microfinance company you are not supposed
to take more than 5% of your paid up capital as deposit from a single individual. You
cannot extend credit more than 10% of your capital to a single individual. You have to bring
a capital of x amount let’s say for now, GHS500, 000. A certain portion of it must be liquid.
All these things would have to be reviewed. In the light of these developments a company
has to bring board of directors, we are going to tighten the requirements for directorship and
all these things are being informed by the review we are carrying out. These reviews will
therefore result in, us tightening our licensing and capital requirements.
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•
Questioner: The essence of microfinance is to go to the
very grassroots and lend to these small people who may not have access to the banks but it
seems lately there are microfinance institutions (MFIs) right in Accra. That is not to say
there are no small people in Accra but then we have the companies in places we least expect
them to set up. In your review would you look at ensuring that microfinance institutions
serve the needs for which they were set up? We see these companies going to the
commercial banks and buying money from them as it were, at a particular rate, and then go
and lend the money to their customers at a higher rate. We complain about the lending rate
of commercial banks but microfinance companies lend at far higher rates. Would where
they obtain their resources for onward lending to customers also be factored into the BoG’s
review?
Mr. Amanfu: We should be a little bit careful about the issue of where MFIs are located.
The most important issue should be they being able to carry out what they are licensed to
do. This is because even in an urban area like Accra there are quite a number of MFIs that
are actually doing micro lending. What should be done is to enforce their compliance with
the guidelines and regulations. On the issue of cost of funds, we should know that MFIs are
financial institutions on their own. We cannot restrict them as to where they get their source
of funding. What we have been doing so far is to try to moderate on the interest rate charges
and I think that by and large where we have had excesses we have had time to discuss the
issues with some of them. The problem we have is that a lot of people go in for micro credit
without even reading the terms of the agreement. That is why we have to step up a bit more
of our financial education. Any time we’ve had to explain terms of some agreements to
people you realise that they knew nothing at all about the agreements they signed, so
financial education is key.
•
Questioner: Some of the customers of DKM say they
will sue the Bank of Ghana for holding on to their money because of the moratorium. What
is your reaction to this?
Mr. Amanfu: The customers did not place their money with Bank of Ghana. What the
Bank is doing is in line with its operational functions.
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