An Examination of Challenges and Prospects of Microfinance Institutions in Ghana

Abstract

The dismal performance of the conventional finance sectors triggered the advocation of micro-financing by policy makers, practitioners, and international organizations as a tool for poverty reduction. The essence was to reach the overwhelming population of the poor to assist in the drive to alleviate poverty. The paper examines the challenges and prospects of microfinance institutions in Ghana. Relevant literatures were reviewed to bring out salient issues on the subject matter of this paper. The chief source of information for this write up is secondary method of data collection. It was discovered that the key constraints faced by MFIs in Ghana include poor regulatory environment, regular vicissitudes in government policies, paucity of capital, inadequate skills and professionalism, infrastructural inadequacies, socio-cultural misconceptions, corruption, frauds and forgeries and poor corporate governance.  Despite this plethora of challenges, the study identified growing entrepreneurial awareness, increasing government interest, large unbanked and/or underserved rural area and high population of poor and low income households and their microenterprises as opportunities that exist for MFIs subsector. This paper recommends among others, establishment Microfinance Development Fund to support capacity building for the sub-sector on an on-going basis, establishment of National Deposit Insurance Corporation to improve public confidence and trust in MFIs subsector and provision of adequate logistics such as telecommunications and information technology to support the operations of MFIs and make them more efficient in rendering affordable services.

Keywords: Microfinance, Poverty, Capacity Building and Strategy, Rural Development, Challenges