The operations of microfinance institutions have been with society for quite some time. The institutionalisation of microfinance by Mohammed Yunus often referred to as the father of microfinance, brought in its wake certain responsibilities and expectations that over time has helped in shaping the operations of microfinance institutions. In Ghana, several attempts have been made to rationalise and regulate the operations of microfinance institutions. Even though the objective of microfinance which is largely to provide financial services to those who cannot access it through the formal financial services particularly the poor, it has been fraught with challenges bordering exploitation and plain thievery.
In view of the above it goes to say the need for supervision is an understatement. It has been realised that the ineffective and inefficient supervision offered by the central bank, Bank of Ghana, to a large extent contributed to the exploitation of the poor under the guise of operating microfinance institution.
The central bank of Ghana has been the regulator of all financial institutions in the country. It appears the function of the central bank relative to the operations of microfinance institutions in Ghana is seriously under scrutiny in the wake of the numerous collapse cases of microfinance institutions. The often raised question is, where or what was the central bank doing in the wake of all these microfinance troubles? The central bank needs a complimentary body that would assist in the proper supervision of these microfinance institutions. The complimentary role the Association of Rural Banks (ARB) Apex Bank is performing to the central bank has led to a large extent sanitisation of the rural banking system in Ghana. The need for an Apex body to help regulate and supervise the operations of microfinance institutions will play a similar role in complimenting the central bank
It is our considered view that if microfinance institutions are properly supervised under adequate regulation shall go a long way to help in building the microfinance industry in Ghana.
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In making a case for the formation of an apex body to help regulate and supervise the operations of microfinance institutions in Ghana, we shall look at the following in our attempt to advocate for its establishment; supervising microfinance institutions in general; microfinance supervision; suggestions for appropriate supervision; specific recommendations to address microfinance risk profile through supervision (ownership and governance risk, management risk, portfolio risk and new industry); microfinance apex bodies, role of Apex Bodies in surviving microfinance institutions in Ghana and conclusion.
Author: Author: Kwasi Kyere
CEO, Star Alliance Microfinance Ltd
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