SUSTAINABILITY OF THE MICRO-FINANCE AND SMALL LOANS SCHEME IN THE WA MUNICIPALITY OF THE UPPER WEST REGION, GHANA

Abstract

The Microfinance and Small Loans Scheme (MASLOS) is the largest Government Microfinance Scheme in Ghana today with presence in every Municipality and District in the country. This study investigated the sustainability of MASLOS in the Wa Municipality of the Upper West Region, Ghana. The study examined the evolution of the lending procedure of MASLOS, the nature and causes of loan default. The study also examined the principles and best practices of microfinance which were applied by the scheme. This study was done against the backdrop that the scheme was confronted with a high rate of loan default which could affect its sustainability. The study employed qualitative research methods, complemented by quantitative research methods and data. The qualitative data were gathered through interviews (in-depth and focus groups) of clients, employees of MASLOS (Wa), and other stakeholders. Secondary data was also reviewed. The results show three distinctive phases in the evolution of the lending procedure of the scheme. A loan default rate of 80% was recorded by the scheme with an outstanding portfolio which was 23 months overdue. About 94% of the overdue portfolio had between 7 and II instalments still outstanding. The microcredit loans performed poorer than the small loans. Seven causes of loan default were identified. Among them include administrative lapses, over - politicization of the scheme and market failure. The principles and best practices of microfinance which are considered necessary for sustainability were not adequately followed to enable the scheme achieve sustainability. The main conclusion of the study is that, MASLOS is not sustainable In the Wa Municipality though some modest improvements regarding the incorporation of best practices in the management of MASLOS has been made. This is because the scheme management has failed to apply certain basic principles and best practices of microfinance. Consequently, it is recommended that greater emphasis be placed on the scheme's adherence to the principles and best practices of microfinance.