The Bank of Ghana has disclosed, that the embattled Sunyani-based DKM Diamond Microfinance Ltd, used customers’ deposits for excessive capital expenditure despite its low paid up capital of GH¢1 million, making it difficult to meet the depositors’ withdrawals on maturity.
The capital expenditure exceeded the Bank of Ghana’s (BoG) specified threshold of not more than 25 per cent of paid-up capital.
According to the BoG, the microfinance company had invested as at May 11, 2015, an amount of GH¢16.06 million in property, plant and equipment, excluding the purchase of three ATMs and a new banking software.
Consequently, DKM Diamond Microfinance Ltd resorted to operating what BoG has described as “something close to a Ponzi scheme” – a fraudulent and unsustainable high yield investment scheme that uses high interests to entice unwary investors for the purpose of settling maturing yields.
The Sunyani-based microfinance company which was found by the Bank of Ghana (BoG) to have flouted the regulations of the sector, had its operations suspended last year by the BoG, resulting in legal action, alleged vandalism, kidnapping and an attempted acid attack by angry and frustrated customers who would have no substitute explanations for their money.
The moratorium on its operations was lifted mid-September 2015 and DKM Diamond Microfinance Ltd claims to have paid GH₵48,732,282.75 as at November 28, 2015, of a total GH¢115.24 million it had in deposits, though it is yet to fulfil the Bank of Ghana’s request for evidence of the payments.
Among its violations to regulations of the sector and to the Banking Act 2004 (Act 673), BoG said the microfinance company also maintained unsustainable interest rates despite several discussions, and did not keep accurate and credible accounts of transactions in its books, consequentially misreporting to the BoG.
It was also found to be overexposed to its affiliate companies: DKM Mining Ltd, DKM Transport Ltd, DKM Shea Butter Ltd, DKM Gas Filling Station and DKM Cement Depot Ltd.
According to the Bank of Ghana, the company also had liquidity mismatches. It granted three to four year loans to its affiliates which were funded by short-term fixed deposits and maturities.
Against the total deposits and interest of GH¢115.24 million, its liquid assets amounted to only GH¢11.8 million and accumulated losses GH¢21.02 million.
Source: myjoyonline