Linking Formal and Informal Financial Intermediaries in Ghana: Conditions for Success and Implications for RNR Development

This paper studies how formal financial institutions can reach out to small-scale rural traders and borrowers. It discusses the case of Ghana and draws out the preconditions that must be in place for linkages of this kind to prosper elsewhere.

The paper analyzes:

• Financial service provision for the Natural Resources (NR) sector in Ghana;
• Financial service needs in the NR sector;
• Linkages between financial intermediaries in Ghana;
• Formalization of linkages between financial intermediaries.

The paper concludes that:

• By linking with existing informal savings and credit arrangements, formal institutions can greatly increase the volume of small loans available to rural people;
• For linkage policies to succeed, the essential features of formal financial institutions are flexibility, innovative approaches and an openness to change;
• Important prerequisites for the formal financial institutions include: a wide spread network of informal savings and credit agents and groups, and recognition they have a role to play in NR development.