THE EFFECT OF INFLATION ON MOBILIZATIONS OF FUND AND ISSUE OF LOANS BY MICROFINANCE INSTITUTIONS: A CASE STUDY OF SOME MICROFINANCE IN THE UPPER EAST AND BRONG AHAFO REGION OF GHANA

Abstract

High inflation is collapsing businesses in many developing countries. And yet inflation is still high in Ghana. It has led to high interest rate charge by financial institutions and therefore individuals’ inability to go for loan and save as well. The study focused on determining the relationship between inflation, mobilization of funds and the issue of loans by Micro-finance Institutions (MFIs). Samples of three (3) MFI’s were conveniently and purposively chosen from Upper East and Brong Ahafo regions for the study. The data was analysed using descriptive, correlation and regression analysis. The key findings were that inflation has inverse relationship between issues of loan and mobilizations of fund, but mobilizations of fund and issues of loan had a direct relationship. Models were therefore developed based on these findings to predict the volume of loan issues and mobilizations of fund, giving inflation.