Policy implementation deficiencies: Ghana’s microfinance sector failures

Abstract

Purpose Regulations to promote sanity in microfinance institutions and improve their operational problems yielded some results but lacked equal voice for effective implementation for its full realization. Much therefore has not changed in sub-Sahara African countries, though various types of regulation for microfinance exist. The nature and implementation of such policies therefore matter more than their mere presence. This paper aims to evaluate the nature of microfinance financial policies, given their social nature and the dynamism of their operational environment, and explores factors mitigating effective implementation of microfinance policy in Ghana. Design/methodology/approach A structured questionnaire was used to obtain data from the management and other officials of 63 microfinance institutions, and the outcome was organized into graphs and tables for descriptive analysis. Findings The results identified adequate adapted prudential regulation for microfinance institutions, but the formulation process lacked user input and adequate supervision, hindering effective sector policy implementation. The author therefore recommends a more inclusive and participatory policy formulation approach, creation of information platform for complete microfinance data through semi-autonomous supervisory body for microfinance services and regular full stakeholder engagement. Research limitations/implications Though the study is limited to tier-two microfinance institutions in Accra, it is evident that the results can be applied to the entire sector and across national borders because microfinance institutions exhibit similar or same characteristics. Originality/value This paper has not been submitted to or published by any other journal. The author certifies that the content of this paper is the product of his own work, and that other sources used in preparing this paper and their respective sources have been duly acknowledged.

The role of microfinance institutions in enhancing the sustainability of women-owned SMMES

“…The issue of limited finances echoes the sentiments of Zainuddin et al (2020) that MFIs need to cater to their sustainability by ensuring they do not rely on donors for funds. MFIs are reported to be understaffed, thus having a high staff-to-client ratio, thus supporting human resource issues cited by Quao (2018). Despite experiencing internal problems (Worku & Muchie, 2019), the MFIs could still implement support programs to assist the SMMEs for example, the NYDA offered one-week business training before an entrepreneur started a business.…”

“…Some of the noted shortcomings of MFIs include a lack of understanding their clients/potential clients, providing services that are not culturally tailored for recipients, strengthening monitoring of borrowers, and ensuring accountability (Worku & Muchie, 2022;Zainuddin et al, 2020). Inadequacies in human resources that are well equipped was another challenge (Quao, 2018). Staff issues were also linked to weak supervision within MFIs, which needed strengthening (Quao, 2018;Zainuddin et al, 2020).…”

“…Inadequacies in human resources that are well equipped was another challenge (Quao, 2018). Staff issues were also linked to weak supervision within MFIs, which needed strengthening (Quao, 2018;Zainuddin et al, 2020). These insti-tutions also have to be sustainable, so their interest rates should factor in growth aspects (Zainuddin et al, 2020), which in turn may affect microfinance beneficiaries.…”