A Note on Microfinance in Ghana

This note reviews the microfinance sector in Ghana and its potential for growth and development. It states that microfinance can contribute through several channels, when properly harnessed. Microfinance creates access to productive capital for the poor, which together with human and social capital enables people to move out of poverty.

The microfinance sector in Ghana has thrived and evolved since the 1900s, thanks to various financial sector policies and programs such as the provision of subsidized credits, establishment of rural and community banks, financial sector liberalization and the promulgation of a law that allows the establishment of different types of non-bank financial institutions. It faces several challenges, however. Microfinance in Ghana has operated without specific policy guidelines and goals. Secondly, traditional commercial banking approaches to microfinance delivery often do not work. The industry faces specific challenges in the areas of:

• Institutional framework;
• Capacity enhancement and funding;
• Credit delivery and management;
• Information and dissemination;
• Regulation and supervision;
• Coordination.

The study recommends efforts to be geared towards the improvement of the institutional capacity and the regulatory framework of the microfinance sector in Ghana.