Microfinance sector in precarious position – GHASSFIN Chairman    

…as regulation precedes policy 

  By Kingsley Webora TANKEH

The Chairman-Ghana Association of Financial Non-Governmental Organisations (GHASSFIN), Spencer Badu, has called on government to expedite passage of the National Microfinance Policy which has delayed for years – expressing worry over the fact that regulating the sector has rather preceded policy, against common practice. According to him, this has left the sector in a precarious position.

“Let government, let the central bank, let the Ministry of Finance prioritise the policy and ensure there’s a policy that spells out clearly what microfinance is, what we need to do,” he urged.

He made these comments at a symposium organised by GHASSFIN alongside the association’s 8th Annual General Meeting (AGM). Comprising 18 members, GHASSFIN is an association of Financial NGOs (FNGOs) operating in Ghana.

Mr. Badu also called for the establishment of a dedicated Microfinance Fund to support institutions serving the nation’s most vulnerable population, noting that the institutions themselves lack access to affordable capital to on-lend.

“Can we have a fund for microfinance? What are we doing to support institutions that support them?” he quizzed, stating that handouts from NGOs and government have proven unsustainable.

He emphasised “supporting institutions in capacity and in resources” is the only way to ensure sustainable poverty reduction, arguing that without targetted government interventions – including a tiered regulatory system and a focus on climate mitigation -efforts to lift Ghanaians out of poverty will be an uphill battle.

Mr. Badu outlined systemic challenges stifling this integral sector that forms the bedrock of financial inclusion for rural, low-income and agricultural communities in ghana.

“Microfinance is very important to the country’s development. The majority of people are in that level of the economy. If we want to mitigate poverty, move people out of the poverty line, then we need to support these institutions,” he emphasised.

According to Mr. Badu, the one-size-fits-all regulatory approach by the Bank of Ghana continues to preclude the sector from making tangible impact as the regulations fail to draw a line between large internationally-backed organisations and small community-based NGOs.

He explained that while GHASSFIN has successfully advocated a lower minimum capital requirement of GH¢300,000 for its members – compared to the GH¢2million demanded from others in the microfinance space – even this reduced figure is prohibitive for many local entities that begin as faith or passion projects.

“The big ones have the capital and capacity to meet regulatory requirements, but those that are local need hand-holding,” Badu said. He is therefore advocating a tiered system wherein the central bank maintains oversight but partners with GHASSFIN to monitor smaller institutions, allowing them to “grow gradually to become big entities”.

As focus turns to agriculture, which bears the brunt of the climate menace, Mr. Badu urged stronger collaboration with insurance providers to de-risk agriculture – citing the recent droughts in northern Ghana which led to widespread crop failures and mass loan defaults.

“You need partners that will be able to insure the crops of clients so that whatever happens, you can still get your loan and lend to them again for the next season.”

He noted that without access to formal microfinance, borrowers – especially farmers – are forced to deal with middlemen who offer loans in exchange for their future harvests; trapping them in a “permanent cycle of debt” with interest rates exceeding 100 percent.

Mr. Badu noted that supporting the microfinance sector is not only for economic growth, but also shows the nation’s commitment to inclusive development and poverty eradication.

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