Scaling Up Microfinance Institutions: Opportunities and Challenges in Rural Areas

Adopting growth strategies in microfinance
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This paper gives an overview of the microfinance sector in Ghana. It suggests strategies for scaling up of MFIs and lists opportunities and challenges for growth in the sector.

Microfinance in Africa, particularly in Ghana, is primarily supply-driven with a limited number of methodologies used mainly to provide working capital loans in rural areas. Directional strategies for MFIs to grow and remain in business may include growth, stability, portfolio and human resource management.

The paper highlights opportunities for MFIs in the scaling up process, such as untapped markets, market access for products of rural poor, enhanced net gains to MFIs and the poor, strategic linkages with donors and stakeholders, capacity building and product development. Challenges for growth and expansion include:

  • Measures to enhance stakeholder participation;
  • Competencies, capacity and organizational structures within MFIs;
  • Attitude of authorities towards providing right policies and regulatory framework;
  • Impact of institutional culture and governance;
  • Commercialization of the industry;
  • Competition and lack of cooperation from established financial institutions;
  • Lack of access to markets and business opportunities;
  • Staff turnover;
  • High loan delinquency and default rates;
  • Lack of monitoring and supervision procedures.

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