An Analysis of the Sustainability of Microfinance Institutions in Kumasi, Ghana

By Kwasi Poku, Kwame Mireku and Stella Nsiah - Asare.

Published by Change Management: An International Journal

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Notwithstanding the crucial roles played by microfinance institutions (MFIs) in the socio-economic development of developing countries, sustainability has been identified as one of the contemporary issues facing these institutions. The main objective of this study is to examine the factors that influence the sustainability of MFIs in Ghana. Primary and secondary data as well as other literature sources were employed for this study. Data gathering instruments used include structured questionnaires, interviews and personal observations during visits to the premises of the various MFIs. A list of all registered MFIs in Kumasi, Ghana’s second largest city, was obtained from the regional offices of Bank of Ghana in Kumasi, and simple random sampling was used to select 40 MFIs for this study. The study revealed that the products and services offered by the MFIs include personal loans, savings and current account services, business loans, agro loans, salary loans and micro-insurance services. The study also revealed that the MFIs employed three broad categories of delivery models which include individual, group and business entity. It was also realized that the concern for institutional sustainability influences the adoption of a particular delivery model. Out of a total of 40 MFIs sampled 27 of them, representing 73%, indicated that the concern of their institutional sustainability influences the adoption of a particular microfinance delivery model. The study further revealed that operational challenges faced by the MFIs include poor loan recovery rate, competition, inadequate IT infrastructure, high staff turnover and inadequate professional staff. Based on the findings of the study, it was recommended that the MFIs should charge reasonable interest rates in order to improve loan recovery rates. They should also pay attention to credit risk assessment to ensure that loans given out are recovered and also employ some well qualified staff to enhance their efficiency.

Keywords: Microfinance, Institutions, Sustainability, Micro-insurance, Delivery Models

Change Management: An International Journal, Volume 12, Issue 2, pp.41-52. Article: Print (Spiral Bound). Article: Electronic (PDF File; 412.020KB).

Kwasi Poku

Lecturer, Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology, Kumasi, Ashanti Region, Ghana

Lecturer at the Department of Accounting and Finance at Kwame Nkrumah University of Science and Technology (KNUST) School of Business in Ghana. He received his MBA (finance) from the University of Leicester in 2004. He currently teaches business finance and corporate finance.

Kwame Mireku

Assistant Lecturer, Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology, Kumasi, Ashanti Region, Ghana

Assistant lecturer at the Department of Accounting and Finance at KNUST School of Business. He received his MBA (accounting) from KNUST in 2009. He currently teaches financial accounting and performance management at the KNUST School of business.

Stella Nsiah - Asare

Pro Credit Savings and Loans Company Limited, Ghana

Holds a B.Ed/Bsc Degree in Nutrition from the University of Cape Coast, Ghana. She also obtained an MBA (Finance) degree from the KNUST School of business in 2010. She currently works for Pro Credit Savings and Loans Company Limited, Ghana, as the Deputy Head of the Small Businesses Department.