The Country Director of the World Bank, Henry Kerali disclosed the information after a consistent revocation of licences of some banks and microfinance companies in the country.

The Bank of Ghana (BoG) recently revoked the licences of more than 70 percent of microfinance companies, bringing their number down to 137 from 484.

According to the Bank of Ghana, reasons for revoking the licences of these companies included undercapitalisation, corporate governance breaches, non-compliance, poor lending and investment practices leading to inordinate losses, and diversion of customer deposits into private businesses, among others.

The move, the BoG says, will cost the taxpayer more than GH¢900 million. The cost to taxpayers, thousands of livelihoods are being affected as a result of job losses. Again, confidence in the sector has been smashed, resulting in mass-panic withdrawals.

It is for these reasons that Mr Kerali is asking the regulator to exercise its mandate strictly in order to prevent or mitigate the risk of such happenings in future.

“In terms of mitigating the risk of these things from happening in the future, there is a need for stronger regulations and oversight for the MFIs and all deposit-taking institutions. They must come under stronger regulation and oversight. There need to be some mechanisms that will allow the central bank to exercise its oversight role without necessarily increasing its size,” he told the media.

He further stated that, even though the central bank’s decision has come at a cost to the economy, it is a necessary evil that ought to be done to restore sanity in the system.

“A lot of the microfinance enterprises, according to the Bank of Ghana, were operating at a loss with huge risks to the depositors – most of whom happen to be small business operators, making the number of people affected much larger than in the banking sector. So, at least, there was a need for the Bank of Ghana to take action, and we strongly support it,” he said.