Shakespeare asked, “What’s in a name? That which we call a rose by any other name would smell as sweet.” Having recently married and changed my last name, I can attest that there is a refreshing feeling that comes with a new name and clean slate. It is an opportunity to leave the past in the past and start anew.
Starting fresh with a new name must be especially freeing if the past was not a sweet smelling rose. According to a recent report, the Bank of Ghana (BoG) is cracking down on MFIs that repeatedly change their names to cover their tracks after they have duped members of the public. Raymond Amanfu, the Head of Other Financial Institutions Department of the Bank of Ghana reports, “Every day, I get at least five applications from companies wanting to change their names….Quite a number of them are actually messed up and want to clean up by changing their name.”
In the past year alone, more than 50 MFIs in Ghana have collapsed. Some have fallen due to poor managerial skills but some have gone further, committing fraud through Ponzi schemes that lure depositors with claims of absurdly lucrative interest rates. In the past, these companies could know the freedom of starting fresh (at least in terms of their reputation, maybe not their practices) by changing their names. Not anymore.
The Bank of Ghana is now forbidding name changes, “Henceforth, no company should apply to change its name. They must use the name on their license,” Amanfu said. The BoG is also clamping down on the illegal transfers of microfinance licenses as well as MFIs that are found to be engaged in activities outside the scope of their license.
Similar action would benefit the microfinance market in Benin, it seems. Initial qualitative research from the client voice project, a Smart Campaign research project carried out by Bankable Frontier Associates, indicates an issue of fraudulent or even fake MFIs in the country’s market.
A number of clients told the research team about submitting savings or application fees to a tontine or MFI, only to have the institution disappear, running off with their money. Without certifications or an awareness of how to verify an institution’s legitimacy, clients may rely on word of mouth to determine which MFIs to choose.
In the case of fake MFIs in Benin, there were reports of “institutions” presenting respectable-looking facilities and even advertising on the radio or in the community, but in reality not being licensed. Discerning between a fake and licensed MFI can be difficult.
We talk a lot in the financial inclusion sector about the need for financial service providers to know their customers well. These stories out of Ghana and Benin raise the question, how well do clients really know their financial service providers?
The Smart Campaign and Bankable Frontier Associates provided content support for this post.
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