The Bank of Ghana has revoked the licences of 39 insolvent microcredit companies for regulatory violations and other supervisory concerns.

A statement from the Central Bank said severe under-capitalization, poor lending and risk management practices, and poor corporate governance practices were among many other reasons accounting for the poor performance and eventual collapse of the 39 failed institutions.

Following the revocation of the licenses of these institutions, a total number of 31 microcredit companies will continue to operate.

It said the Bank of Ghana has also notified the Registrar of Companies at the Registrar General’s Department of the revocation of the licences, and requested the Registrar to commence winding-up proceedings against these companies.

It said the action is pursuant to section 7 of the Non-Bank Financial Institutions Act, 2008 (Act 774), which mandates the Bank of Ghana to revoke the licence of a non-bank financial institution (NBFI) licensed under that Act if that institution among other things ceases to carry on business or ceases to satisfy a qualification under the Act or contravenes any provision of the Act or rules or directives issued by the Bank of Ghana.

The statement said a total of 70 microcredit companies were licensed by the Bank of Ghana from 2011 until the end of 2015 under Act 774, to provide micro loans.

Despite notices issued to the affected institutions by the Bank of Ghana over the last few years requiring remediation of identified regulatory violations and other supervisory concerns, the institutions failed to address the issues brought to their attention.

Following the revocation of the licences of the institutions, a total number of 31 microcredit companies will continue to operate.

Going forward, the Bank of Ghana is strengthening its regulatory and supervisory framework, and promoting confidence in the microcredit sector through a comprehensive review of licensing and supervisory policies and directives and a review of the minimum capital requirements for microcredit and encouraging possible consolidation through voluntary mergers and acquisitions.

The Bank will also introduce proportional corporate governance, fit and proper, and risk management directives; strict supervision of licensed micro credit companies and enforcement of relevant regulatory requirements; and increase the resources available for effective supervision of licensed micro credit companies.

The Bank of Ghana assured the public of its commitment to promoting stability of the financial system, the statement added.