Assessing the Impact of Operational Flaws on the Performance of Microfinance Institutions in Ghana

Abstract

Microfinance institutions contribute significantly to the development of a country, and many of these institutions are found in most developing countries including Ghana. However, many challenges have been alleged to stifle the efforts of microfinance companies in their attempt to make their all-important contribution to the development of nations. This study explored the effect of operational flaws on the performance of microfinance institutions in Ghana. The results discovered flaws and challenges associated with the operations of the MFIs in many areas including corporate governance, credit risk management, credit administration, regulatory challenges, and training programs. The study also revealed that such flaws and challenges do harm the overall performance of the MFIs. Based on the findings, it is recommended that MFIs put in place a well-composed and resourceful credit committee to perform the duty of credit risk management in the institutions. The institutions could also reduce their interest rates to encourage their clients to apply for more loans. Lastly, it is recommended that the MFIs take all necessary steps to ensure that they reduce the flaws and challenges they face to mitigate the negative impact of such deficiencies on their performance.