Crisis in microfinance institutions in Ghana a case study of selected microfinance institutions in the Ga East Municipality

Abstract

Effective management guaranteed the robustness of the banking sector and helped to ensure the financial stability of an economy. Microfinance has over the years, been identified as one of the channels to empower women economically. Qualitative research methodology was employed to attain the research objectives which are to identify the causes of crisis in microfinance institutions in Ghana and examine how they responded to the crisis. The participants of the study were ten (10) from 5 institutions in the municipality using the purposive sampling procedure. Qualitative data were collected using audiotaping of interviews and using the semi structured interviews from the 10 participants. Results obtained from the analysis of the data transcripts indicated that there were high default rate, high interest rate and lack of supervision amongst the institutions. The finding also showed that the microfinance institutions indicated that they had to call the clients to verbally renegotiate and give the customers additional months to be able to pay back the loan facility when it comes to inability to pay back loans on time. It was further revealed that the microfinance institutions had to cut a lot of loans that were given out and further reduce the amount per loan that was to be sent to customers. Also, the study found that concerning the response to excessive repayment terms, microfinance institutions had to stop loan payment that lasted for more than six months. It was therefore recommended that the government and the non-government organizations should support private Micro Finance Institutions (MFIs) to set up special units for only Small and medium-scale Enterprises (SMEs) which will tax interest rate and provide extensive support for them.