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We can’t regulate interest rates on investment – Micro finance companies
Despite calls for micro finance companies to quote realistic returns on investments, some micro finance companies still promise investors unreasonable returns.
The phenomenon has led to debacles in the industry as some companies promise over 30 percent returns per month on investments.
Speaking to Citi Business News, the Executive Secretary of the Association of Micro Finance Companies (AMFC), Mr. Joseph Donkor was of the view that even though the situation is worrying, the association cannot force microfinance companies to quote specific returns since it is a free market.
“When it comes to interest rates, we don’t have a controlled interest rates [regime]in the country. The rate is determined by demand and supply”.
He however added that “it is an area that we are very much concerned about”. Mr. Donkor stated that the association has been able to urge its members to quote reasonable rates to avert financial crisis.
“Indeed the time that people were giving high interest rates, we didn’t hear of that from our members and so what we have told our members are that, operate within reasonable risks. By this, if people are depositing to you and they want an interest rate that is outrageous and way above what is prevailing in the market, then you have to be careful . It is the same with their lending activities also,” he noted.
Calling for more education, Mr. Donkor stated that the general public must be sensitized to understand the financial market.
He pointed out for example that there is no way any business person can fulfill an outrageous 30 percent returns on investment in a month in the industry.
“I think people must be made to understand that you cannot get so much returns just in a short period. It cannot work here in the microfinance industry”.
He assured that the association will continue to work with the Bank of Ghana to improve activities in the industry.