Effects of Poor Supervision on the Sustainability of Micro-Financial Instutions in Ghana (A Focus on Nkoranza Municipality in the Brong Ahafo Region) (original) (raw)
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Government and non-governmental organizations are increasingly becoming concerned with access to credit to stimulate entrepreneurial activities among the poor. This requires effective and efficient mobilization and management of financial resources resulting in the growth of MFIs in recent times. These MFIs are springing up and collapsing at an alarming rate leading to the poor and microenterprises losing their money yet, they are becoming increasingly popular with the unbanked and the under-banked. This exploratory research attempts to explore the contributing factors of the rapid growth in the number of MFIs in Ghana and the opportunities and challenges it presents. In this regard a purposive sampling technique was used to select MFIs operating in the Brong Ahafo Region where both the managers and customers of MFIs were interviewed. 30 MFIs and 70 customers from various professions and enterprises were interviewed during the study. The study revealed that operators have taken advantage of the many challenges many people in the low income bracket have with the traditional banks in the country. Most of the customers of MFIs identified collateralization as a major reason for patronising MFIs with the microfinance companies providing tailor made services and products. In addition, it was revealed that the flexibility in their dealings have opened up the gate for more people to engage or do business with the microfinance companies. The MFIs however are faced with challenges including inadequate capital, poor loans recovery and credibility problems. It is recommended that credit risk monitoring and supervision efforts should be intensified by the companies with credit officers undertaking periodic follow-ups on borrowers to ensure that loans are used for the intended purpose. The microfinance companies should continue to diversify its credit delivery and lending activities. This study has demonstrated that MFIs have created opportunities in the economy especially in the area of credit availability and other banking services. They also provide numerous job opportunities. ii DECLARATION
Investigating the Challenges Faced by Microfinance Institutions in Ghana: Evidence from Takoradi
Research on Humanities and Social Sciences, 2019
Micro Finance Institutions (MFIs) contribute immensely to the economy of every nation. Particularly, within the informal sector, MFIs constitute the pivot around which many financially disadvantaged individuals rely on in terms of access to finance for their businesses. MFIs play a tremendous role in the poverty reduction and employment creation agenda of many nations including Ghana. Notwithstanding the immense role MFIs play in the economies of nations, there is a wide recognition of the fact that the institutions can perform better if they are able to overcome the challenges they face in their operations. However, in order for MFIs to effectively tackle the challenges they encounter, it is important for them to first identify and appreciate these challenges and the threats they pose to the effectiveness of their operations. Within this context, this study sought to explore the challenges MFIs in Ghana face, with particular emphasis on those operating in Takoradi. The study was quantitative, with descriptive survey as the design. Managers and employees of MFIs located in the city licensed by the Bank of Ghana were involved in the study. Simple random sampling method was used to select 114 respondents for the study and questionnaire was relied upon for data collection. The researchers used frequencies, percentages, an independent samples t-test and ANOVA as tools for data analysis. The study observed that increased competition in the industry, low repayment rates, higher cost of information technology, low level knowledge of operators, inadequate and expensive infrastructure base, high capital requirements, unfavourable regulation and supervision, inadequate employee incentives, and erosion of public confidence in MFIs were ranked as major challenges in the industry. A significant difference existed in the perception of male and female respondents on the challenges MFIs in the city faced. However, there was no statistically significant difference in educational qualifications of respondents and their views on the challenges MFIs in Takoradi faced. It is recommended that MFIs in the city should invest in staff development for all levels, from senior level to junior level. Also, Managements of MFIs should put in place adequate measures to educate their clients on the need to pay their loans and also institute appropriate sanctions to deal with loan defaulters. This will also require MFI to ensure credit worthiness of clients before granting them loans. Again, the Managements of MFIs should come out with appropriate measures to incentivize their employees so as to avoid possible cases of poaching.
IMPACT OF FINANCIAL REGULATIONS ON MICROFINANCE INSTITUTIONS SUSTAINABILITY IN GHANA
IMPACT OF FINANCIAL REGULATIONS ON MICROFINANCE INSTITUTIONS SUSTAINABILITY IN GHANA, 2020
This article examines the "impact of financial regulations on the microfinance institutions sustainability in Ghana". The purpose is to investigate financial regulations effects on sustainability of the institutions. The study used primary and secondary data and the primary data was gathered with the help of a structured questionnaires administered to the regulators, management, policymakers and to the customers. The data was analyzed using Statistical Packages for Social Sciences and Microsoft Excel. The results revealed that regulations and policies have negative and positive impacts on the sector. They contributed immensely towards the institutions' development through training and capacity building, regulation and supervision, protecting customers/depositors, ensuring financial soundness and financial inclusion. Again, the results show that the factors that determine microfinance sustainability are positively and significantly driven by minimum capital requirement, regulators activities, credit default, government policies, and capital structure. Furthermore, the results demonstrated microfinance challenges as not complying with regulatory guidelines, improper risk management, poor technology, and lack of Government support. While examines the challenges facing financial regulations as cost of regulations, political influence, inadequate staff, and poor information dissemination. We recommend regulators, policymakers, and all key stakeholders to support microfinance institutions in the country for long term sustainability.
Macrothink Institute, Journal of social science studies, 2019
The objective of the paper is to investigate the complexities that are prevailing in the micro financial system which has recently witnessed foray of digitalization and conceivably suggesting an integrated financial product system biased to demand side as a way forward for policy consideration towards mitigating poverty and unemployment in Ghana. For the said purposes, the study is based on secondary data and published official documents. Further, the filed observations of the principle author who has worked as a branch manager in Ghana have been taken cognizance of the empirical facts while doing in both descriptive analysis and drawing conclusion as well. The major bottlenecks that hinder smooth function of microfinance, include insufficient donor funds to MFIs, lack of proper adherence of rules and regulations improper monitoring system, loan delinquency in the supply side, and continued dependence on traditional money lender regardless of rate of interest poor clients protection and capability differential among 51 the poor clients of MFI in the demand side. For challenging these hurdles, a slew of suggestions which are made for policy considerations include arranging adequate investable fund through institutional linkages, candid identification of target group based on their capabilities as poor, poorer, poorest, designing integrated pro poor financial products and services (credit plus)capability building of the poor through financial and digital literacy and skill up graduation, client protection to the poor till graduation above poverty line, moral suasion to the actors for eschewing higher interest of rate microfinance. The study confirms the presence of challenges and bottlenecks in the MFI management and the need for due diligence for achieving their mission in terms of reduction of poverty and unemployment.
European Journal of Business and Management, 2019
This study examined the relationship between financial regulation of microfinance institutions and their sustainability and outreach from the view point of managers and operation staff in northern Ghana. Methodology: The study used primary data. Purposive and convenient sampling techniques were used in selecting 189 managers and operating staffs across 18 microfinance institutions operating in northern Ghana. In addition, the researchers purposively sampled 5 experienced senior staff from the Bank of Ghana. Data was collected using structured questionnaires, which was personally administered by the researchers and two research assistants. Research assistants were trained by the researchers on the ethics of this study before and during the data collection process. Data collected was analysed using Spearman's correlation and descriptive statistics. Findings: The study found positive statistically significant relationship between financial regulation and financial sustainability and outreach among managers and operation staff of MFIs surveyed in northern Ghana. The study further found that financial regulations of MFIs in northern Ghana affected sustainability and outreach. Originality: This study adds to the literature on financial regulation and microfinance sustainability and outreach in the context northern Ghana. Limitations: This study is limited to only northern Ghana and not Ghana in its entirety. The study was delayed due to publication processes and other factors and changes might have taken place in the microfinance industry in northern Ghana. However, this notwithstanding, the results of the study are still relevant for publication.
Factors that Determine the Sustainability of Microfinance Institutions in Ghana
Ussif Ramatu, 2020
Microfinance performs a key role in Ghana and sub-Saharan African countries in their development. Ghana has witnessed unprecedented collapses and unsustainability of microfinance institutions in recent years (2017-2019) necessitating such studies to unravel the determining factors using selected microfinance institutions in the country. The article also investigates the reason for the revocation of microfinance licenses, besides reasons for microfinance collapse and their remedies. Data was gathered and analyzed using SPSS and Microsoft Excel. The results reveal that the factors affecting microfinance institutions' sustainability are positively and significantly driven by minimum capital requirement, credit default, outreach-levels, government policies, high-profit-motive, and capital structure. Insufficient training, poor management, insufficient monitoring/supervision, the collapse of other institutions, and panic withdrawals are the reasons why most microfinance institutions collapsed. Finally, we recommend that there should be compulsory training/capacity building, outreach programs, low-interest-rates, and experienced-staff to strengthen the organizations' performance and maintain sustainability.
An investigation of the financial monitoring policies for microfinance institutions in Ghana
Investment Management and Financial Innovations
The need to regulate microfinance institutions (MFIs) was advocated and researched yet lacks purposeful in-depth exploring studies of the formulation process of financial monitoring policies, their implementation and accompanying challenges. Consequently, this study contributes by reviewing the specific financial policies for microfinance in Ghana and assesses factors mitigating effective implementation of such policies. It also introduces implementation theory into the MF research arena, thus shifting MF research focus. The study revealed that policies formulated for MFIs in Ghana and elsewhere are skewed and policy implementation, monitoring and supervision found to be less effective. The results further identified inadequate support structures and large unlicensed profit-oriented informal microfinance operations in Ghana as major obstacles to efficient implementation of microfinance policies. This paper therefore recommends the creation of a semi-autonomous institution, the Natio...
The Journal of African Development, 2016
The study inquired into why microfinance institutions (MFIs) collapsed in the Ashanti Region of Ghana. The authors found that the problem related primarily to unduly risky, unethical and illegal practices, mismanagement and disregard of due diligence, which when convoluted by external factors like macroeconomic instabilities and panic withdrawals, pushed the risk levels of MFIs beyond the point of containment. We argue that the 2013 macroeconomic crisis in Ghana only contributed to the huge number MFIs involved and the pervasiveness of the collapse – the crisis was not a root cause.
Factors affecting the sustainability of growth of Micro-Finance institutions in Zimbawe
2014
Microfinance institutions (MFIs) play an important role in developing nations. The number of MFIs operating in Zimbabwe were gradually increasing against a background of unstable trends. The study sought to establish the factors that affect the sustainability of their growth. A descriptive survey research design was adopted. Out of the one hundred and seventy two MFIs which were operational in Harare, a sample of twenty three was used. The study participants comprised of middle managers, senior managers and the clients of the selected MFIs. The questionnaire was used as the main data collection tool. Literature was reviewed which looked mainly at other studies done in the related area. The study found that there were several factors that affected the sustainability of the growth of MFIs in Zimbabwe, some of them emanating mainly from the economic situation in the country. The study recommended the establishment of an effective credit rating bureau, suitable government policies, amon...