The Money Lenders Association of Ghana (MLAG) has signed a memorandum of understanding (MoU) with Star Microinsurance Services Limited to provide its members and clients with innovative microinsurance products.
MLAG is an umbrella organisation for money lenders and individuals under the companies code 1963 (act 176) as an association limited by guarantee to provide microfinance services under the tier three and tier four of Bank of Ghana’s categorisation and has a membership of 350 in the 10 regions of Ghana.
Microinsurance works as a protection for low income earners in the society against specific perils. Microinsurance products are innovative products carefully designed to meet the needs of low income earners in the society. Products include Funeral Policy, Microhealth Care, Child Education Policy to name just a few.
With this collaboration, MLAG believes they would be able to mitigate some of the financial risks its members are facing, which would in turn create a stronger ground for effective and efficient financial services for the unbanked sector of the economy.
Star Microinsurance Services Limited is a subsidiary of Star Assurance and Star Life Assurance. Star Microinsurance was established in 2008, to provide innovative microinsurance solutions to the informal sector of the country. It has collaborated with a number of apex bodies to provide micro insurance solutions to its members.
Apex bodies like Ghana Association of Microfinance Companies (GAMC), Ghana Association of Susu Collectors Association (GHASCA), ARB APEX Bank have all entered into unique collaborations with Star Microinsurance Services Limited to provide affordable, accessible and attractive microinsurance solution for their members.
Star Microinsurance also recently signed an MoU with Ghana Post to sell a unique product called AbusuaNkyemfa through the post office outlets all over Ghana. The service is currently available in 15 outlets.
Money lenders have welcomed the revised operating rules and guidelines for microfinance institutions, describing it as adequately addressing their concerns.
After several stakeholder deliberations, microfinance institutions have been categorized into 4; a breakdown from the earlier broad categories of 2.
Tier 1 of the review comprises rural and community banks, finance houses and savings and loans companies which would continue to be regulated under the Banking Act, 2004 (Act 673).
Susu companies, credit unions and other deposit taking and profit making financial NGOs are placed under Tier 2 and expected to have minimum capital of Gh¢100,000.
Money lenders and non-deposit taking financial NGOs are under Tier 3 but are now expected to have capital base of Gh¢60,000 instead of the initially-proposed GH¢100,000.
Individual Susu Collectors and money lenders have also now been classified under Tier 4 with no minimum capital requirement.
Even though the microfinance institution with capital requirement still have up to the end of the year to meet it, Public Relations Officer of the Money Lenders Association of Ghana (M-LAG), Lawrence Agyei told Citi Business News the review satisfactorily addresses their earlier concerns.
“They included money lenders with no capital requirement and that is some source of good news to those who have been in the business for a long time.
“We are generally happy with the Bank of Ghana. At a negotiation table you always do not expect 100% win in your favor and so far their reasoning has been acceptable to us”.
Lawrence Agyei is also certain that the review will guide the public in making informed microfinance decisions.
From Modern Ghana
The Microfinance and Small Loans Centre (MASLOC) is currently striving to, in the near future make practical its policy document status of being the apex body of microfinance institutions in Ghana.
Should it succeed, the centre will be more empowered to subsequently concentrate much of its lending efforts on wholesale lending rather than spending time on its present three mandates of loaning to groups, individuals and that of other microfinance institutions.
According to MASLOC, such a move would help regularise the activities of these institutions while helping to boost credit availability to the informal sector which continue to accommodate a large chunk of the country’s entrepreneurial community yet receives the least financial attention from banking and non-banking financial institutions nation-wide.
The Chief Executive Officer of the centre, Ms Bertha Ansah-Djan told the GRAPHIC BUSINESS that the centre was now aiming at making proper use of its policy document status as “the apex body of microfinance institutions”.
Associations such as the Ghana Association of Microfinance Institutions (GHAMFIN), Money Lenders Association of Ghana (MLAG) and the ‘Susu’ Collectors Association (MLAG) are currently serving as the respective umbrella bodies of their individual institutions.
The microfinance sector has for the past few years witnessed dramatic growth, but regulations, supervision and monitoring of the activities of these institutions in the country has however left much to be desired.
The sector was, until 2007 legally under the control, supervision and licensing of the Criminal Investigations Department (CID) of the Ghana Police Service, a mandate many financial experts thought was not well placed and therefore not well executed by the criminal body.
The passage of the Non-bank Financial Institutions Act, 2007, Act 774 has, however, transferred that mandate of regulating and licensing these institutions which fall under the microfinance sector from the police onto the Bank of Ghana. (BoG)
Many however think that the numerous roles of the Central Bank including regulating the country’s financial sector and commercial banks would not give it the needed time and resources to monitor and supervise the sub-sector.
The BoG had earlier on observed that a number of financial service providers, including financial NGOs, Susu companies, money lenders, and companies that come under the microfinance sector have over the past few years emerged.
The BoG has under the ARB Apex Regulations, LI 1826, delegated its monitoring and supervision powers to the ARB Apex Bank to monitor and supervise rural banks while the Securities and Exchange Commission (SEC) at the moment also serves as the apex body of the country’s security or the capital market. The microfinance sector is however yet to get such a sub-sectorial control delegated by the BoG.
MASLOC is therefore currently aiming at getting such a mandate that would enable it to become the umbrella body of these microfinance institutions, effectively monitor and supervise their activities and subsequently lend its funds to them for onward lending to the informal sector in general.
But that, according to the MASLOC CEO would require the passage of centre’s policy document into a a law to give them full mandate to play such a role.
The document, she said was currently before Cabinet “read through by all the authorities” and awaiting the relevant measures to get it passed.
The government earlier this year hinted of its readiness to restructure and re-organise the MASLOC to enable it ”effectively finance local entrepreneurs and rural agriculture.”
According to Ms Ansah-Djan, stepping up MASLOC’s wholesale lending to microfinance institutions in the near future would help boost credit access to the sector to enable it undergo the needed expansions.