Microfinance and Culture: A Case Study in Ghana

This case study examines how understanding the culture, at the family and community level, can be used to obtain improved sustainability and developmental results in the microfinance sector by modifying the program and adapting procedures to integrate local practices. Using a review of anthropological literature as a starting point and baseline, a series of cultural traits were identified and used to pose questions about how the local family and kinship systems might impact on MFI's operation. The purpose of these questions was to focus on cultural issues that were to be explored during the field-work portion of the study. In terms of MFI operations the findings were that:

• The Ghanaian culture is in a significant transition;
• Certain cultural norms, values and practices provide MFIs with an opportunity to leverage social capital to reduce risk, develop new products, contribute to sustainability and measure impact.

The following recommendations came out of the fieldwork and apply to MFIs working in Ghana in the Techiman district:

• That lending programs take full advantage of the social capital available in the practice of "knowing" a person's character;
• That MFIs in Ghana build their loan collection methodology around the social capital involved in the guarantor system;
• That microfinance institutions become aware of the dynamics of individualism operating below the surface;
• That lending programs be consistent with the limits of the social capital in the society;
• That MFIs develop a loan product for farmers that is marketed as interest inclusive;
• That microfinance institutions develop an insurance product to help reduce the vulnerability of women dependent on trade capital profits for survival;
• That the social capital of 'knowing' be used in staffing microfinance organizations to reduce the threat of fraud within the organization.

Finally the author concludes that cultural analysis can provide valuable knowledge about local mechanisms that can be extremely useful to MFIs as it demonstrates that cultures have built into them parameters around their social capital which MFIs can easily use and avoid significant mistakes by trying to apply their own cultural biases.