"The proliferation of unlicensed institutions and fun clubs, promising unsustainable rates of between 30 per cent and 55 per cent every two months (330 per cent per annum) was worrying."
The Bank of Ghana (BoG) has warned that it will soon close down all unlicensed micro-finance institutions (MFIs) in the country in an announcement of the closure of some ten microfinance companies.
Head of Other Financial Institutions Supervision Department of the Central Bank, Mr. Raymond Amanfu told journalists at a press briefing that, "the proliferation of unlicensed institutions and fun clubs, promising unsustainable rates of between 30 per cent and 55 per cent every two months (330 per cent per annum) was worrying."
Such institutions collapse in no time, creating the impression that the Bank of Ghana had placed moratoriums on their operations when they had not.
He said most of these institutions could be found in the Brong Ahafo, Western, Upper East, and Upper West regions.
He explained that the base rates of government securities, which were risk-free and paid interest rates of about 24/25 per cent per annum; the rates promised by these companies, even if covering the risks associated with them, were not sustainable, especially over two-month periods.
Mr. Amanfu maintained that some of these were “Ponzi schemes”, where the operators used increasingly higher interest rates to mobilise more deposits to pay their depositors.
He also stressed that, the Bank of Ghana was collaborating with the Financial Intelligence Centre and Security Agencies to track down, arrest and prosecute Directors, Shareholders and Management of unlicensed institutions, and may also include Media houses that advertised these illegal institutions for abatement of crime.
“Henceforth the Bank of Ghana shall close any illegal institutions reported to be taking deposits, with the support of security agencies.”
Some of the unlicensed institutions identified by the Central Bank are Care For Humanity International, Buoyant Investment Limited, God Is Love Fun Club, Perfect Business Fun Club, Perfect Edge Group, L.P.M Eye Adom Fun Club, Creative Fun Club, Little Drops Helping Hand Association, Financial Giants Fun Club and Great Winners Fun Club.