Microfinance in Ghana: Development, Success Factors and Challenges

Microfinance is defined as the provision of financial services such as loans to low-income households, the poor and microenterprises. Over the past decade, microfinance institutions (MFIs) have sprang up rapidly in the Madina area of Greater Accra region of Ghana. It is therefore critical to examine the actual aims of these MFIs. The impulse of this research is to assess the development of microfinance in the Madina area. The study conveniently sampled twelve microfinance institutions. The instrument used for data collection was questionnaire. The managers of these MFIs were purposively selected to respond to the questionnaires. The study revealed that the development of microfinance in the past five years has been with the sole purpose of, providing income to low-income households who operate their own businesses. In addition, the success factors are provision of services which were appropriate and consistent with customers’ situation and needs, character-based lending, frequent visit of credit officers to customers. The major challenges were lack of adequate client information, higher information technology cost, lack of vehicle for transportation, higher utility cost, higher salaries, unwillingness of clients to provide personal information and lack of solid credit risk management policy.