Ghana’s financial regulator, the Bank of Ghana (BoG), as part of the efforts to strengthen the country’s microfinance institutions, is now demanding a new GH¢100 million in capital to operate.
The BoG’s new rules say that for existing firms, the target is GH¢50 million by the end of 2026.
On the surface, the move might appear as a strategy to build “financial fortresses,” but experts are asking a tough question: Is throwing more money at the problem really the cure, or are we just papering over deeper cracks?
What Exactly are SDIs?
For the start, Specialized Deposit-Taking Institutions (SDIs) include Savings and Loans companies, Rural and Community Banks, and Microfinance firms. They are the lifelines of the underserved.
Unlike big commercial banks, SDIs focus on providing small loans to market traders, farmers, and startups that traditional banks often ignore. They are the engines of financial inclusion, turning small savings into productive capital for the informal sector.
The GH¢100M Question: Why Capital Alone Fails
The BoG believes that increasing its minimum capital will make SDIs more resilient. However, a research work by Banking and Financial Consultant, Dr. Richmond Atuahene, recent history tells a different story.
According to Dr. Atuahene, in 2018, capital requirements were raised, yet the sector still faced a massive crisis, requiring a GH¢21 billion bailout just two years later.
For the financial and banking consultant, the reality is that capital is not the only panacea if the foundation is rotten. He points to a “pocket bank” mentality where owners treat depositors’ money as their personal ATM.
He illustrates that if an institution has GH¢100 million but uses it for “insider dealing” and undocumented loans to the owner’s friends, that capital will vanish just as fast as GH¢15 million did.
The “Mission Drift” Crisis
The expert in banking further reveals that a major reason for the industry’s struggle is mission drift. Instead of sticking to small loans for poverty reduction, many SDIs are trying to act like “quasi-commercial” banks.
He narrates a shocking example where one Savings and Loans company, with a capital requirement of just GH¢15 million, had a staggering GH¢146 million loan exposure to only six companies. This, he describes as not micro-lending; it is a high-risk gamble that ignores the 25% single-borrower limit designed to protect your savings.
With such a situation, no amount of new capital can fix a business model that is fundamentally broken and “Ponzi-like”.
The Regulator also Plays a Role
He further argues that the regulator itself needs a shake-up. He alleges what he describes as a “regulatory inertia” and “ethical failures” within the BoG’s own supervision departments. Staff were reportedly aware of early warning signs as far back as 2018 but failed to act.
For him, ff the “watchman” ignores breaches of the law because of personal or political influence, then a GH¢100 million requirement is just a higher barrier to entry that doesn’t actually make the system safer.
A More Practical Path Forward
Instead of the “recapitalization blues” of the past, the banking expert suggests a more moderate approach. He therefore recommends the following measures to the Bank of Ghana.
• Lower the Bar: Instead of GH¢50 million for existing Savings and Loans, cap it at GH¢30 million to reflect the current recovering economy.
• Buy More Time: Extend the deadlines to December 2027 to avoid forced mergers that lead to job losses and cultural clashes.
• Independent Probes: Before demanding more money, commission an independent investigation into the “distressed” firms to see where the money actually went.
• Inflation Protection: Introduce index-linked capital tied to the Consumer Price Index (CPI) to ensure the value of the bank’s assets doesn’t get swallowed by inflation.
The Bottomline
The expert does not totally rubbish more capital, which can be a good safety net, but it is not the solution to poor governance, risky lending, and weak supervision.
Until the BoG enforces the rules it already has, the GH¢100 million mandate might just be a very expensive band-aid on a deep wound.
