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
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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
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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
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GDP was 5.8% as at 2007
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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 %
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Inflation - 18.03% as at September 2008
Prime Rate is 17 %
Commercial lending Rates (25 – 35%)
Currency is Ghana Cedis
(USD 1.00 =GH¢1.21)
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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
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The main goal of Ghana’s 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.
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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
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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.
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Provision of subsidized credits in the 1950s.
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Establishment of the Agricultural Development Bank in 1965
specifically to address the financial needs of the fisheries
and agricultural sector.
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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;
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Shift from regulated financial sector regime to a liberalized
regime in the 1986 leading to the emergence of other
financial institutions;
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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).
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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)
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Formal suppliers such as savings
and loans companies, rural and
community banks, as well as
some
development
and
commercial banks;
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Semi-formal suppliers such as
Credit Unions, Financial NGOs,
Cooperatives
and
Susu
Associations;
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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:
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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
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Economically active poor who are clients of microfinance products
and services.
Technical Service Providers
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Business Development Service Providers,
Government of Ghana
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Ministry of Finance and Economic Planning
Bank of Ghana
Ministries, Departments, Agencies (MDAs) and Metropolitan,
Municipal and District Assemblies (MMDAs),
Supporting Institutions
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Microfinance and Small Loans Center (MASLOC);
The Ghana Microfinance Institutions Network (GHAMFIN);
Universities, Training and Research Institutions;
Development Partners and International Non-Governmental
Organisations
Institutional Framework
REPORT
ON THE
INAUGURAL MEETING
OF THE
GHANA MICROFINANCE FORUM
NOVOTEL, ACCRA
14TH SEPTEMBER 2007
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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 Non-Government
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 Enterprises
Project( I)
MLGRDE
Selected MMDAs
IFAD/GoG
US $7M
Emergency Social
Relief Fund (ESRF)
MEPRCI
Multi-sectoral
World Bank
US $13M
Capacity Dev’t &
Utilization (CDU)
EMPRETEC Gh.
Foundation
MSMEs/PFIs
UNDP
US $4.7M
Current Country Strategies
LEAD
INSTITUTION
COLLABORATING MFI
MAJOR FUNDERS
BUDGET
Ghana Poverty
Reduction Program
(GPRP)
Social Investment
Fund (S.I.F)
MMDAs/PFIsRCB/FNGOs
African Dev’t Fund
(AfDB)/GoG
US$ 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
Community-Based
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 $100M
Micro, Small
&Medium Enterprise
Development
MoTI /PSD &PSI
All MSMEs/Interested
MFIs
UNDP
US$ 65M
PROGRAM
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 non-existent.
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