International Journal of Accounting, Finance and Risk Management

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Analysis of Financial Performance and Sustainability of Microfinance Institutions in Ghana

Received: 07 April 2019    Accepted: 23 May 2019    Published: 12 June 2019
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Abstract

Microfinance has become crucial to Ghana's financial system over the last three decades. They target the financially excluded and poverty stricken population with micro financial products, empowering the poor to create livelihoods for themselves and by so doing contributing towards the economic growth of the country. In recent years, there have been reported cases of the collapse of several microfinance institutions and others facing serious challenges. These series of events signal an ominous situation for the microfinance subsector and the entire financial system for that matter. This study therefore aims at examining the performance of microfinance institutions in Ghana, focusing on three key performance indicators; profitability, liquidity and credit advanced. The study revealed that loan default and interest expenses are the major variables which negatively affect the performance of the MFIs. In ensuring the sustenance of the microfinance subsector of the financial system, the study recommends that, the MFIs should adopt lending methodologies which minimize loan defaults and the Bank of Ghana should be encouraged to strength its regulatory oversight and power to rein in MFIs which offer outrageous rates of return on customers' deposits.

DOI 10.11648/j.ijafrm.20190401.14
Published in International Journal of Accounting, Finance and Risk Management (Volume 4, Issue 1, March 2019)
Page(s) 34-43
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This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Microfinance Institutions, Profitability, Liquidity, Credit

References
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Author Information
  • Department of Banking and Finance, School of Business, University of Education, Winneba, Ghana

  • Department of Banking and Finance, School of Business, University of Education, Winneba, Ghana; Department of Accounting, School of Business, University of Education, Winneba, Ghana

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  • APA Style

    Emmanuel Atta Anaman, Mavis Pobbi. (2019). Analysis of Financial Performance and Sustainability of Microfinance Institutions in Ghana. International Journal of Accounting, Finance and Risk Management, 4(1), 34-43. https://doi.org/10.11648/j.ijafrm.20190401.14

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    ACS Style

    Emmanuel Atta Anaman; Mavis Pobbi. Analysis of Financial Performance and Sustainability of Microfinance Institutions in Ghana. Int. J. Account. Finance Risk Manag. 2019, 4(1), 34-43. doi: 10.11648/j.ijafrm.20190401.14

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    AMA Style

    Emmanuel Atta Anaman, Mavis Pobbi. Analysis of Financial Performance and Sustainability of Microfinance Institutions in Ghana. Int J Account Finance Risk Manag. 2019;4(1):34-43. doi: 10.11648/j.ijafrm.20190401.14

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  • @article{10.11648/j.ijafrm.20190401.14,
      author = {Emmanuel Atta Anaman and Mavis Pobbi},
      title = {Analysis of Financial Performance and Sustainability of Microfinance Institutions in Ghana},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {4},
      number = {1},
      pages = {34-43},
      doi = {10.11648/j.ijafrm.20190401.14},
      url = {https://doi.org/10.11648/j.ijafrm.20190401.14},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijafrm.20190401.14},
      abstract = {Microfinance has become crucial to Ghana's financial system over the last three decades. They target the financially excluded and poverty stricken population with micro financial products, empowering the poor to create livelihoods for themselves and by so doing contributing towards the economic growth of the country. In recent years, there have been reported cases of the collapse of several microfinance institutions and others facing serious challenges. These series of events signal an ominous situation for the microfinance subsector and the entire financial system for that matter. This study therefore aims at examining the performance of microfinance institutions in Ghana, focusing on three key performance indicators; profitability, liquidity and credit advanced. The study revealed that loan default and interest expenses are the major variables which negatively affect the performance of the MFIs. In ensuring the sustenance of the microfinance subsector of the financial system, the study recommends that, the MFIs should adopt lending methodologies which minimize loan defaults and the Bank of Ghana should be encouraged to strength its regulatory oversight and power to rein in MFIs which offer outrageous rates of return on customers' deposits.},
     year = {2019}
    }
    

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    AU  - Emmanuel Atta Anaman
    AU  - Mavis Pobbi
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    JF  - International Journal of Accounting, Finance and Risk Management
    JO  - International Journal of Accounting, Finance and Risk Management
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    UR  - https://doi.org/10.11648/j.ijafrm.20190401.14
    AB  - Microfinance has become crucial to Ghana's financial system over the last three decades. They target the financially excluded and poverty stricken population with micro financial products, empowering the poor to create livelihoods for themselves and by so doing contributing towards the economic growth of the country. In recent years, there have been reported cases of the collapse of several microfinance institutions and others facing serious challenges. These series of events signal an ominous situation for the microfinance subsector and the entire financial system for that matter. This study therefore aims at examining the performance of microfinance institutions in Ghana, focusing on three key performance indicators; profitability, liquidity and credit advanced. The study revealed that loan default and interest expenses are the major variables which negatively affect the performance of the MFIs. In ensuring the sustenance of the microfinance subsector of the financial system, the study recommends that, the MFIs should adopt lending methodologies which minimize loan defaults and the Bank of Ghana should be encouraged to strength its regulatory oversight and power to rein in MFIs which offer outrageous rates of return on customers' deposits.
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