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Microfinance in Ghana : A Comparative Study of Performance of the Formal versus Informal Rural Financial Institutions
No full text2011-03-28A growing number of formal commercial banks are increasingly showing interest in financing the vast underserved and untapped market of microenterprises in Ghana. However, the greater majority are still on the fence and are hesitant to venture into microlending. Using field survey data from a wide range of rural financial institutions, we analysed the performance (both in terms of non-performing loans (NPLs) and managers' perception of growth performance) of formal banks, compared to the traditional MFIs, in microlending, emphasizing the incentives and disincentives as well as risk mitigation strategies. The study finds that while the main incentives driving banks into microlending were profitability and changing market conditions, disincentives ranged from a high cost of transaction to a perceived high risk of microentrepreneurs. Further, while asset-based collateral was found not to affect the performance of FIs, we find evidence to support the hypothesis that collateral leads to a reduction of NPLs. However, informal FIs were found to perform better in reducing default rates than the formal FIs. On depth of outreach, whereas FIs with clients dominated by women were more likely to perform better, those located in rural areas were more inclined to have higher NPLs. Finally, while a higher scope of outreach was found to be significant for performance, high lending rates charged by FIs led to higher levels of default rates.departmental bulletin pape
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Can Mobile Money Revolutionize an Ancient Saving System among Indigenous West Africans? Evidence from Ghana (IMTFI Blog)
Get PDFThis study attempts to provide insights into the ancient susu savings operation in Ghanaand the behavioral intention or willingness of susu collectors and users to adopt a mobilemoney (hereinafter referred to as “MM”) platform as part of their savings practices. Morespecifically, this study investigates factors that determine one’s intention to adopt the MMspace as a savings channel, particularly in place of a traditional way of saving amongmany people in West Africa, i.e. susu. Using field survey data from market traders andsusu collectors in several local markets in Ghana, and applying Innovation DiffusionTheory (IDT) and Technological Adoption Model (TAM) conceptual frameworks, thisstudy has produced some interesting findings
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What Drives Behavioral Intention of Mobile Money Adoption? The Case of Ancient Susu Savings Operations in Ghana
Get PDFThis study provides insights into the ancient susu savings operation in Ghana and the behavioral intention or willingness of susu collectors and users to adopt a mobile money (MM) platform as part of their savings practices. More specifically, this study investigates factors that determine one’s intention to adopt the MM space as a savings channel, particularly in place of more traditional ways of saving among many people in West Africa. The study reports many interesting findings but one that is striking is the physical presence of the susu collector, which was found to be statistically significant but having a negative influence on one’s behavioral intention to accept MM. This, which was found to be the primary reason motivating susu users to honor their savings commitment, is potentially an important factor in explaining why respondents were not sure whether an MM platform would be an effective method of saving. While MM uptake remains significantly low, the study findings suggest that the way to increase uptake is to create more awareness, embark on financial literacy programs, and reduce mistrust and perception of risk of the MM platform
Microfinance in Ghana : A Comparative Study of Performance of the Formal versus Informal Rural Financial Institutions
No full textA growing number of formal commercial banks are increasingly showing interest in financing the vast underserved and untapped market of microenterprises in Ghana. However, the greater majority are still on the fence and are hesitant to venture into microlending. Using field survey data from a wide range of rural financial institutions, we analysed the performance (both in terms of non-performing loans (NPLs) and managers' perception of growth performance) of formal banks, compared to the traditional MFIs, in microlending, emphasizing the incentives and disincentives as well as risk mitigation strategies. The study finds that while the main incentives driving banks into microlending were profitability and changing market conditions, disincentives ranged from a high cost of transaction to a perceived high risk of microentrepreneurs. Further, while asset-based collateral was found not to affect the performance of FIs, we find evidence to support the hypothesis that collateral leads to a reduction of NPLs. However, informal FIs were found to perform better in reducing default rates than the formal FIs. On depth of outreach, whereas FIs with clients dominated by women were more likely to perform better, those located in rural areas were more inclined to have higher NPLs. Finally, while a higher scope of outreach was found to be significant for performance, high lending rates charged by FIs led to higher levels of default rates
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What Drives Behavioral Intention of Mobile Money Adoption? The Case of Ancient Susu Saving Operations in Ghana (Exectutive Summary)
Get PDFThis is the 2-page executive summary for the IMTFI Working Paper: What Drives Behavioral Intention of Mobile Money Adoption? The Case of Ancient Susu Saving Operations in Ghana.The susu (deposit) savings scheme has traditionally been an important, effective way for low-income and financially-excluded people in Ghana to save money. It is not cost-effective for formal banking institutions to handle large volumes of small deposits or to physically provide service to isolated rural areas, and the cost of sending savings deposits to banks is prohibitive, effectively precluding poor people in urban and rural areas from using them.Susu savings schemes provide a convenient, informal, flexible, and cost-effective mechanism for individuals to save money on a regular basis. The rotating savings andcredit association is a type of susu scheme in which an operator reaches an agreement with a user regarding the amount to be collected, frequency of collection, and operator’s commission. Collectors for the susu operator ‘walk’ to visit their users (on foot, bicycle, or motor bike) on a daily or weekly basis to collect their savings, and record it on a card often kept by the users. This is convenient for both parties, and creates a social contract based on mutual trust and obligating the user to physically give the money to the collector, and the collector to visit the user to collect it and then return the accumulated savings to them at the end of the month. No legal documentation is involved
What Drives Behavioral Intention of Mobile Money Adoption? The Case of Ancient Susu Savings Operations in Ghana
No full textWhat Drives Behavioral Intention of Mobile Money Adoption? The Case of Ancient Susu Saving Operations in Ghana (Exectutive Summary)
No full textFinancial exclusion: what drives supply and demand for basic financial services in Ghana?
No full textThe majority of people in Sub-Saharan Africa does not have a basic bank account and are financially
excluded from mainstream financial services. This paper examines factors that drive
geographic exclusion of banking services to rural communities and households’ demand for a
basic bank account in Ghana. Using rural community based and household survey datasets,
the study finds that banks’ decisions to place a branch in a community are positively influenced
by elements as the market size, the level of infrastructure such as energy and communication
facilities in the area, market activeness but are negatively influenced by the general level
of insecurity associated, for example, with crime, conflict, natural disasters. Conversely,
households’ demand for a bank account appears to be strongly driven by both market and nonmarket
factors such as price, illiteracy, ethno-religion, dependency ratio, employment and
wealth status as well as proximity to a bank.La plupart des peuples de l’Afrique sub-saharienne n’a pas un compte de dépôt et
est exclue des services financiers. Cet article examine les facteurs d’exclusion géographique
des services bancaires des communautés rurales et la demande des ménages
d’ouverture de comptes au Ghana. Une enquête auprès des communautés et ménages
révèle que les décisions d’implantation des succursales bancaires sont positivement
influencées par des facteurs comme la taille et le dynamisme du marché; la
qualité des infrastructures telles que l’électricité; les moyens de communication. Elles
sont négativement influencées; par exemple; par l’insécurité; la criminalité; les
conflits; les calamités naturelles. Inversement; les sollicitations d’ouverture de
comptes pour les ménages sont à la fois liées aux facteurs commerciaux et non-commerciaux
tels que les prix; l’analphabétisme; les questions ethno-religieuses; le taux
de dépendance; l’emploi; le bien être et la proximité des banques
Does foreign banks entry influence domestic banks' efficiency? Evidence from Ghana
Get PDFThe study investigates the effect of foreign bank entry on the efficiency of domestic banks in Ghana. The study applies the Stochastic Frontier Analysis (SFA) technique and the system Generalized Method of Moments (GMM) estimator on bank specific level data, spanning the period 2000 to 2015. The results show that foreign banks with an average profit efficiency of 74.7% are more profit efficient than domestic banks with a score of 71% which conforms to the global advantage hypothesis. This suggests that foreign banks are able to maximize revenue through the generation of interest income on loans and investments better than domestic banks due to the foreign banks' comparative advantage in terms of international expertise. Further, the system GMM results indicate that the entry of foreign banks has contributed to the profit efficiency of domestic banks in Ghana. This positive spillover effect of foreign banks is manifested in their transfer of international expertise, technological knowledge, quality banking services and competitive pressure to domestic banks. In addition, bank size and liquidity are essential determinants of the profit efficiency of domestic banks in Ghana. The findings of the study imply that bank regulators in developing countries should push for reforms that eliminate implicit and explicit barriers that may hinder the entry of foreign or new banks
Are Ghana’s Public-Sector employees overpaid? Understanding the public/private wage gap and its effect on the government deficit
No full textGhana is again experiencing large and chronic fiscal deficits that many analysts attribute to a sharp increase in its the public-sector wage bill. This study uses macroeconomic and household survey data to examine public employment and public wages both historically and in comparison with private-sector wages. Although we do find a public-sector wage premium in the most recent data (for 2012/2013), it is not as large as one would expect from the macro data, totaling only 15 to 28 percent of the public-sector wage bill, or 2 to 3 percent of gross domestic product. That is far from enough to eliminate the government deficit. To make further reductions in the wage bill, policymakers must either make the normative case that public-sector workers should be paid less than private-sector workers with similar qualifications, something that will be difficult politically, or they must adjust the required skill levels of public-sector employees downward, something that may not make administrative sense. There is some low-hanging fruit in the public-sector wage bill, but not enough to resolve Ghana’s fiscal crisis
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