4 key points why microfinance in Ghana may miss the poverty reduction objective

The regions noted for high number of poor people have the least number of microfinance Institutions. More than 90% of the MFIs are located in the urban centers competing the universal banks over the same customers.

The characteristic of the clients being targeted by MFIs are  mostly people above the poverty line with majority of them having the ability to spend USD 2.0 per day.

Regulation of MFI in Ghana does not encourage MFI to keep focus on improving the social aspect of microfinance. There is no much diffrence between the Universal and microfinance regulation. The social aspect that MFIs can address are the strong elements that informs whether a microfinance can achieve the necessary impact. Credit does not directly  lead to better nutrition or improvement in financial literacy. The training received by microfinance client is what informs them to be able to make the most important choices including how to better manage the credit they receive.

MFI staff today are more traditional banking oriented than developmentally oriented. They serve clients of MFIs just the same way they will serve universal bank clients.

MICRO ENTREPRUERS MUST GROW

I will disagree with anyone who will say that the Ghanaian is lazy. The average person in Ghana is not lazy considering the hard work people undertake to earn their survival. The various micro enterprises started and managed by many people is a demonstration that majority of the people in the informal sector are working hard to reduce their own “level of poverty”. Unfortunately many of these people inspite of their hard work have not been able to either grow their enterprises as expected. Some have managed the same size of business over the years.

The question is; what is keeping the hardworking man on the street hawking and hawking without graduating into a different business? What is keeping the koko(porridge), waakye (rice mixed with beans), roasted plantain seller, etc from transforming their small joint into a micro then to small and then becoming a medium enterprise? Analysing these issues overtime it is clear to me that hard work and access to credits are not the only ingredients needed for enterprise development or wealth creation.

The capacity of the micro entrepreneur including the hawker comes to play. Many of our entrepreneurs work with their raw skills. There is little or no adoption of tools and systems that can enable them to innovate well. Innovation can be capital intensive but simple ways of finding out how something can be done better may not need much money.
Why should the koko seller still fetch koko from the bowl of koko with a cup? Can’t there be a better and healthy way to do this?

Why should the plantain seller subject herself to serious health hazard to provide for her household without a better way of doing her business?
Why should the farmer still struggle just to keep a 1 acre farm? Many of such questions can be asked but how do we help solve these challenges.

• Business innovators must not only focus on developing strategies for the bigger businesses. There is need for more “thinkers” who can create creative systems that can help micro- enterprises to function better and more effectively. 
• Financial institutions must not only sell credits and saving products  they must be enterprise transformers.
• Government must not just be involved in supplying credit to the poor they must help finance tools and structures that can enable small businesses to work effectively and efficiently.

GHANAIAN MFIs AND TECHNOLOGY ADOPTION

The West Africa Microfinance industry is way behind innovate technology. Technology in the Ghanaian microfinance is limited to the use of the MFIs. Client have limited means to interact to their MFIs through the use of technology app.

The telecoms are trying hard to improve the use of the mobile money. The challenge here is that clients would still have to liquidate their e-cash to “real” cash before usage. This is not like the case in Kenya, Uganda and others where you can still transact with your “e cash”.  In this case there is much motivation to be on that platform.

Another challenge with mobile money platform in Ghana is the reliability of the mobile payment systems. I have for the past months not being able to use my e-cash to pay simple bills. I have complained to the service provider and till date that issue have not been solved.

In Ghana for example cash reload or transfer can largely be done from one network to the other and not across the networks. This is much of an inconvenience to clients because one would have to locate an agent for a specific provider before you can load or download your cash. The search for an agent can take you forever.

The way to improve innovation within the microfinance sector in Ghana is through partnerships and linkages. From my observations MFIs in Ghana are typical of Ghanaian businesses where everyone think they can succeed by operating as standalone entities. The challenges and opportunities in the microfinance business is so huge that no one MFI can harness the opportunity alone or will be able to conquer the challenges alone. There is the need to break up this “island business attitude” and seek for positive innovation and partnerships to help transform the entire microfinance industry. This is the only way to further improve on the relevance of microfinance services to clients as well as towards national development.