Good Money’ Chasing ‘Bad Money’: Implications for MFIs Management and Governance in Ghana – Ghana’s perspective

Good Money’ Chasing ‘Bad Money’: Implications for MFIs Management and Governance in Ghana - Ghana’s perspectiveRural and Community Banks (RCBs) are managed by Chief Executive Officers (CEOs) and governed by Board of Directors (BoD). The board as usual is elected by shareholders during Annual General Meetings (AGM). The management committee is headed by the CEO who is appointed by the board. In Ghana RCBs are community based and the rule is that the CEO and the board members must come from the community. Since the CEO and the board members are from the community, they are not likely to be independent in dealing with clients from the community. The Apex bank regulations, L.I 1825 section 35 stipulates the role of the board of directors of RCBs in Ghana as follows:
1.    The board shall ensure that any application for financial accommodation is dealt with and considered strictly on financial and economic merit to ensure that the bank: (a) performs its functions and conducts its affairs in accordance with sound business, financial and administrative standards and practices, and (b) takes measures that are necessary to ensure that any financial assistance rendered by the bank is utilized for the intended purpose.
2.    The board shall formulate borrowing and lending policies for the bank;
3.    The board may propose to any RCB or the Bank of Ghana, measures for efficient and profitable management or operation of a rural bank and the proposals may include mergers, acquisitions, amalgamations and reconstruction.
There is no statutory duty therefore for a board member to influence in the loan application or disbursement at the banks. Unfortunately, in Ghana, some board members have been involved in the loan application and disbursement processes for some clients who they have relations with. Such actions are tantamount to fraud, dishonesty or moral turpitude (Section 33) of the Apex Bank Regulations, Legislative Instrument (L.I) 1825. read more
The law governing credit unions in Ghana is the Non-Bank Financial Institutions Law (NBFL) 1983. Management of credit unions (CUs) is governed by Credit Union bye-laws formulated by the Credit Unions Association (CUA) of Ghana. CUA is the Apex body mandated by the BoG to regulate and supervise the activities of all credit unions in Ghana. All credit unions in Ghana are required by law to constitute a board. Management is supposed to be independent of the board in its functions. In a like manner loan officers are to be independent of management. The Credit Union Bye-Laws govern the operations of all credit unions in Ghana. With regards to loans, the bye-law states among others that:
1.    Loans shall not be disbursed to clients for a period exceeding 2 (years);
2.    No individual member shall be given a loan amount more than 20% of total savings of the society;
3.    Application for loans shall be in writing and on prescribe forms