Microfinance Sector in

Ghana
Presented at

Hotel White Sands, Dar es Salaam, Tanzania, from 17 28

November, 2008
Organised by
International Development Law Organisation (IDLO)
Under the Theme
Microfinance : Building Inclusive Financial Sectors and Supportive
Legal and Regulatory Frameworks for the East African Region
Presenters
Nana Opare-Djan, CEO/Kraban Support Foundation, Ghana
Adishetu Hamidu Apania, Asst. Econ. Officer, Min. of Fin. & Econ. Planning (MoFEP)

Presentation Outline

Background/Introduction
Key Stakeholders
Institutional framework
Previous MF Strategies
Current Country Strategies
Challenges
Way Forward

Background/Introduction
Economic profile
of Ghana
MF & poverty
reduction in
Ghana
The evolution of
MF sector

Economic Profile of Ghana

Main blueprint for development is the

Growth & Poverty Reduction (GPRS II)
document
Seeking Ghana to become a middle income
country with per capita income of $1000
Economy must grow at an annual average
rate of 6.02% in Cedi terms to realize the
$1000per capita income by 2015
GDP was 5.8% as at 2007

Relative shares of the various sectors and

sub-sectors in GDP
Agriculture is about 36%
Industry is about 25 %
Services is about 29 %
Indirect Taxes constitute about 10 %

Inflation - 18.03% as at September 2008

Prime Rate is 17 %
Commercial lending Rates (25 35%)
Currency is Ghana Cedis
(USD 1.00 =GH1.21)

Population is 21 million
Birth Rate is 2.6%
Mortality is 57 years
Large informal sector (80%) & subsistence
Financial Literacy Rate is 38%

MF & Poverty Reduction in

Ghana

The main goal of Ghanas Growth

and Poverty Reduction Strategy
(GPRS II) is to ensure sustainable
equitable growth, accelerated
poverty reduction and the
protection of the vulnerable and
excluded within a decentralized,
democratic environment.
The intention is to eliminate widespread poverty
and growing income inequality, especially among
the productive poor who constitute the majority
of the working population.

According to the 2000 Population

and Housing Census, 80% of the
working population are found in the
private informal sector.
This group is characterized by lack of access to
credit which has become a key factor militating
against the development and growth of that
sector of the economy.

The Evolution of the

Microfinance sector

Available evidence also suggests that the first

credit union in Africa was established in Northern
Ghana
in
1955
by
Canadian
Catholic
missionaries. Susu, which is one of the current
microfinance schemes originated from Nigeria
and imported to Ghana in the early 1900s.

Provision of subsidized credits in the 1950s.

Establishment of the Agricultural Development

Bank in 1965 specifically to address the financial
needs of the fisheries and agricultural sector.

Establishment of Rural and Community Banks,

the
introduction
of
regulations
such
as
commercial banks being required to set aside
20% of total portfolio to lend to agriculture and
small scale industries in the 1970s and early
1980s;

Shift from regulated financial sector regime to a

liberalized regime in the 1986 leading to the
emergence of other financial institutions;

Promulgation of PNDC Law 328 in 1991 to allow

different categories of financial institutions
including savings and loans companies, financial
non-governmental organizations (FNGO) and
Credit Union Associations (CUA) to provide a
diverse range of financial services to Micro and
Small Enterprises (MSEs).

MF Evolutionary Outcomes
(1)
Access to financial services is imperative for the
development of the informal sector and also helps to
mop up excess liquidity either as surplus or
investment capital for national development.
The
Ghanaian financial sector, in spite of the reforms, still
experiences a gap between the demand for and the
supply of financial services.
The observation was stressed in the International
Monetary Fund Country report on Ghana of May 2003
that weaknesses in the financial sector that
restrict financing opportunities for productive
private investment are a particular impediment
to business expansion in Ghana.

MF Evolutionary Outcomes
(2)

Formal suppliers such

as savings and loans
companies,
rural
and
community banks, as well
as some development and
commercial banks;
Semi-formal
suppliers
such as Credit Unions,
Financial
NGOs,
Cooperatives and Susu
Associations;
Informal suppliers such
as; Money Lenders, Susu
collectors and Rotating
Savings
and
Credit
Associations (ROSCA),

Key Stakeholders
End users

Main practitioners
Technical service
providers
Government of Ghana
Supporting
institutions

Main microfinance
practitioners

Microfinance Apex Bodies namely:

Association of Rural Banks (ARB) - Rural and Community

Banks,
ARB Apex Bank
Association of Financial NGOs (ASSFIN) - FNGOs
Ghana Cooperative Credit Unions Association- Primary
Societies
Ghana Cooperative Susu Collectors Association (GCSCA) Susu Collectors
Savings and Loans Companies
Some development and commercial banks
Micro-insurance and micro-leasing.

End Users

Economically active poor who are clients of microfinance

products and services.
Technical Service Providers

Business Development Service Providers,

Government of Ghana

Ministry of Finance and Economic Planning

Bank of Ghana
Ministries, Departments, Agencies (MDAs) and
Metropolitan, Municipal and District Assemblies (MMDAs),

Supporting Institutions

Microfinance and Small Loans Center (MASLOC);

The Ghana Microfinance Institutions Network (GHAMFIN);
Universities, Training and Research Institutions;
Development Partners and International NonGovernmental Organisations

Institutional Framework

Ministry of Finance & Economic Planning

Bank of Ghana (MoFEP)
Microfinance and Small Loans Centre
(MASLOC)
Ghana Microfinance Institutions
Network (GHAMFIN)
Ministries, Departments & Agencies
(MDAs)
Metropolitan, Municipal & District
Assemblies (MMDAs)
Assoc. of Rural Banks (ARB)
ARB Apex Bank Limited
Ghana Credit Unions Associations
(GCUA)
Ghana Cooperative Susu Collectors
Association (GCSCA)
Association of Financial NonGovernment Orgs. (ASSFIN)
Ghana Savings and Loans Companies
(GHASLOC)

Previous Country Strategies

PROGRAM

LEAD
INSTITUTION

COLLABORATING MFI

MAJOR
FUNDERS

BUDGET

Land
Conservation &
Smallholder
Rehabilitation
Project
(LACOSREP)

MoFA

Participating Banks
RCBs, Commercial
Banks ,FNGOs &
Technical Service
Providers

IFAD/GoG

US $16.5 M

Smallholder
Rehabilitation
and
Development
Project (SRDP)

MoFA

Participating Banks
RCBs, Commercial
Banks, FNGOs &
Technical Service
Providers

IFAD/GoG

US $10M

Smallholder,
Credit Input
Supply &
Marketing
Project (SCIMP)

MoFA

Participating Banks
RCBs, Commercial
Banks, FNGOs &
Technical Service
Providers

IFAD/GoG

US $11M

Village
Infrastructure
Project (VIP)

MoFA

Selected MMDAs

IDA/WB

US $47M

Poverty
Alleviation Fund

MLGRDE

All 170 MMDAs

World Bank

Rural

MLGRDE

Selected MMDAs

IFAD/GoG

US $7M

Current Country Strategies

PROGRAM

LEAD
INSTITUTION

Ghana Poverty
Reduction
Program (GPRP)

COLLABORATIN
G MFI

MAJOR
FUNDERS

BUDGET

Social
Investment
Fund (S.I.F)

MMDAs/PFIsRCB/FNGOs

African Devt
Fund
(AfDB)/GoG

US$ 18M

Urban Poverty
Reduction
Program (UPRP)

Social
Investment
Fund (S.I.F)

Selected Urban
Towns/ National
Investment Bank

OPEC Fund/GoG

US$ 35M

Rural enterprises
Project (REP II)

MLGRDE

Selected
MMDAs/PFIs

IFAD/GoG

US$7M

CommunityBased Poverty
Reduction
Project (CBRDP)

MLGRDE

MMDAs/Rural
& Community
Banks

IDA/World
Bank/GoG

US$47M

Horticultural &
Infrastructure
Improvement

Millennium
Development
Authority (MiDA)

Selected 26
MMDAs/PFISRCB/FNGOs

Millennium
Challenge
Corporation

US$547

MASLOC

Office of the
President (OoP)

ALL MSMEs/PFIs

GoG

US $100M

Micro, Small
&Medium
Enterprise

MoTI /PSD &PSI

All
MSMEs/Interested
MFIs

UNDP

US$ 65M

Other MF Services
Linkages
Barclays Susu Collectors
ASSFIN EB.ACCION S&
L/Ghana Commercial Bank
Grain Banking Initiative
Technoserve/FBOs/NGOs
NTCD/E ADRA Ghana
MF/USAID /Smallholder
Farmer Groups
Export Development Fund
Ghana Private Sector
Development Growth Facility

Technical Services only

Support Program for

Enterprise
Empowerment &
Development (SPEED)
Ghana Financial
Literacy & Consumer
Education-GTZ/DANIDA
MoFEP-Rural Financial
Services Project (RFSP)
Value Chain
Enterprises
development
SNV/ACDI-VOCA/PCV

Other Social Investors

Oikocredit EDCS SAT
Vision Fund APED
ECLOF International,
Geneva ECLOF
Ghana
ABC Microfinance
KSF
Kiva Microfunds
SAT/CRAN
Planet Finance APED

Grants
JICA Physically
Challenge Persons
initiative
TIAW/KSF
Refugees on-lending
program
UNICEF
CIDA
CCFC
Cordaid
DANIDA
Oxfam GB/Novib
NEW Energy
Etc

Challenges
Institutional Arrangement
The stakeholders in the sub-sector play various roles which are expected to
be complementary. Due to lack of defined areas of operation, the roles and
responsibilities of stakeholders currently overlap in some cases. The
overlap is also due partly to the fact that organizational and institutional
hierarchy and reporting relationships among all the stakeholders are not
clearly defined. There is the need therefore to clearly define relationships
and roles to enhance effective implementation and delivery of services.

Capacity Building

Human Capacity
To promote the sub-sector, the various stakeholders organize training
programmes and activities with the view to upgrading the human capital in
the industry. Though helpful, the competency level desired to be achieved
with these training programmes is still below the expected. Thus, the
human capacity of some key stakeholders and institutions including
MASLOC, GHAMFIN, Bank of Ghana, MFIs, and relevant Ministries such as
the Finance and Economic Planning and Technical Service Providers is
currently inadequate. The random and incoherent nature of training
programmes has also hampered the achievements of the projected gains
for the sub-sector. The flaw in the human capacity of all the stakeholders
has had a rippling effect on the governance and structure of the industry.
Furthermore, the current Microfinance Apex bodies lack adequate cadre of
in-house trainers and/or facilitators as well as in-house monitoring and
evaluation units to continually measure progress of their activities
consistently overtime.

Infrastructure
Infrastructural capacity in the sub-sector is yet to be developed around an
integrated and holistic logistical support and internal operating systems.

Funding
Funding for the sub-sector has been from three sources: the institutions
themselves, government and development partners. Firstly, available funds
do not seem to be adequate to meet demand and secondly, the varying
sources come with their conditions, distorting the market in some cases.
There is also no microfinance fund to which MFIs can apply for on-lending
and capacity building support.

Credit Delivery and Management

Credit Delivery Mechanisms

The current strategies for credit delivery are not adequately diversified and
inefficient, and therefore, unable to meet the varying demands of the market.
Categorization of Institutions
There is no framework for categorizing and upgrading some of the emerging
microfinance institutions in the semi-formal and informal sub-sectors in
accordance with their operational capacities and capabilities.

Classifying target groups

The objective of the microfinance is to provide resources for the poor.
Nonetheless, there is yet to be adequate, reliable and acceptable methods for
classifying varied poverty levels to enhance the categorization of potential and
actual MFI clients.

Targeting the Vulnerable and the Marginalized

People with disabilities

People with disabilities and differently-abled do not have designed products to meet
their needs and are also not adequately served by existing microfinance funds
and services. The necessary skills training for this target group is currently nonexistent.

Women
The existing skills training and funding arrangements for women do not seem to
be market-driven. Thus, specific services and products that target women for
entrepreneurship development to enable them engage in economic activities
and become more self-reliant are inadequate and incoherent.

Youth
Young people aged 15-24 years account for about a third of the population of Ghana
and constitute over half of the unemployed population. Yet, there are no special
microfinance programmes that target the youth for entrepreneurial
development.

Challenges (ctd)
Data/Information Gathering and Dissemination

National data and Reporting System

Generally, there is paucity of information on microfinance institutions, their operations and clients in the country. Approaches to and methodology for
data and information gathering at the national level are not uniform, leading to poor interventions and categorization of institutions. The current
attempt to develop a national data bank on microfinance is yet to be fully realized. There is lack of well defined reporting system by both the
government and development partners with regards to their interventions. The outcome is inadequate data base for decision-making and planning.

nstitutional data
At the institutional level, data/information gathering and dissemination are weak within and between institutions. The lack of common benchmarks, methods
for measuring and information sharing further inhibits the performance of the sub-sector.
Clientele Data
Lack of adequate and reliable information on outreach in terms of depth and breadth remains one of the most daunting in the sub-sector. This lack of
information has affected targeting of clients and ultimate poverty reduction.
Regulation and Supervision
National
There is no forum for dialoging between and among the regulatory bodies, apex institutions, various categories of microfinance practitioners and the
end the users in the formulation, implementation and review of regulatory and supervisory policies and procedures. The absence of a recognized
system to identify and coordinate MFIs in Ghana leads to fragmentation in the operations of the sub-sector.
Formal Institutions
Microfinance institutions in this category face rigid regulatory and supervisory systems and these present some challenges for product
innovativeness, outreach and ultimately the performance of the institutions.
Semi-formal and Informal Institutions
There is lack of well specified guidelines for operations and among apex bodies namely, CUA, GCSCA, ASSFIN and Cooperative Council. This leads to
uncoordinated activities and invariably hampers the performance and outreach of their member institutions.

Challenges (ctd)
Consumer Protection
Current microfinance practices lack the mechanisms for ensuring consumer protection or sovereignty. The non disclosure
and lack of transparency undermines the operations of some MFIs.

Collaboration and Coordination

National
There is no national body which is responsible for coordinating all activities associated with microfinance. As a result there
is lack of coherent approach, fragmentation, duplication and inadequate collaboration between and among MDAs, MMDAs,
development partners, service providers, practitioners and end users.

Institutions
Apex institutions, their member institutions and service providers do not have an overall coordinating body that will ensure
the institution fora, mechanisms for the transfer of best practices, identifying and use funds for on-lending and resolving
multiple placement of clients. The existing institution does not include all practitioners and service providers.

Research, Monitoring and Evaluation

Current research activities within the sub-sector are weak and inadequate. Researches undertaken are uncoordinated focus
areas of specific institutions. There is therefore no national research agenda to inform planning and policy formulation in
the sub-sector.

Monitoring and Evaluation

The current capacity of various institutions in the sub-sector to undertake monitoring and evaluation of programmes and
activities is currently inadequate. No national monitoring and evaluation framework exists to guide practitioners on their
activities. Different monitoring and evaluation frameworks are being used making it difficult to undertake comparative
assessment of programmes and projects for their impact on the performance of institutions and clients.

Way Forward
Relationships and roles must be clearly
defined to enhance effective
implementation and delivery of services
Central Microfinance Fund could be
established to provide on-lending and/or
capacity building support. The experience of
the RFSP Training Fund should be built upon
The current attempt to develop a National
Data Bank should be carried through and
fully utilized