A COMPARATIVE ANALYSIS OF THE OPERATIONAL STRATEGIES AND CHALLENGES OF NON GOVERNMENTAL ORGANISATION AND RURAL BANK MICROFINANCE INSTITUTIONS IN THE NORTHERN REGION OF GHANA

Abstract

The purpose of this study was to do a comparative analysis of the operational strategies and challenges of the NGO MFI and the Rural Bank MFI. The study was conducted in three districts of the Northern region that is Tamale Metropolis, Savelugu-Nanton and Tolon-Kumbugu. This study used purposive and convenience sampling techniques to collect data from 144 respondents. Both qualitative and quantitative data were collected. Percentages, frequencies tables and graphs were used to present the data. The study revealed that, women appeared to be more involved with microfinance institutions than their male counterparts. Out of the total beneficiary respondents of the MFIs, 77.9% were females. The study further found that the procedures for accessing credit and recovering loans were common to all four MFIs in the study area. There were however few variations in the operational strategies of the MFIs in terms of the nominal interest rate, processing fees and upfront compulsory deposits charged on loans before disbursement as well as interest rates paid on clients’ deposits and the frequency of payments. The study also investigated constraints identified by management of the MFIs. Those that posed the severest challenges to their operations included poor credit appraisal of potential clients, poor or inadequate monitoring of loans, high transaction cost, poor regulatory environments and inadequate skill development and training of staff. The study recommends among others the establishment of MFIs credit bureaus, strict adherence to regular loan monitoring, lowering transaction cost by taking advantage of economies of scale in group based lending and peer monitoring systems, the need to collaborate and push for a national microfinance policy on regulation and the building of staff technical and skills development capacity.