Factors influencing the sustainability of microfinance institutions in Ghana : a case of microfinance institutions in Ashanti region

Abstract

Eradication of poverty is a big problem in the world and many countries are doing their possible best to get rid of it. Ghana is one of these countries. Microfinance, which deals with the provision finance to the poor, has become an important tool to eradicate poverty. How these microfinance institutions can sustain their business has become a big problem in Ghana since many of these institutions have collapsed recently. The need to search for factors affecting the sustainability of these institutions has arisen and that is what this research is looking up to. This research is searching for factors that influence the sustainability of microfinance institutions in Ghana. Due to the nature of this research, descriptive research was the appropriate research design to use. Purposive sampling was used for the selection of the managers (respondents) of the various microfinance institutions. The research found that several institutions struggled with high default rates and also charged high interest rates. Bank of Ghana which is the central bank of the country, has set rules and guidelines which regulate the establishment and the management of the microfinance institutions. Bank of Ghana has increase the minimum capital requirements (startup capital) of these microfinance institutions which has a negative influence on their sustainability. The introduction of financial technology in Ghana’s financial sector has an influence on the sustainability of microfinance institutions. Financial technology such as mobile money has a positive influence on microfinance institutions in Ghana since these institutions has taken advantage of this technology to increase their profit margin.