Assessing the Impact of Collapse of Microfinance Institutions on Its Customers in Ghana (a Case Study of Cape Coast Metropolis)

Abstract

ABSTRACT The millennium development goals (MDGs) have brought the emphasis on people back to the center of development, whilst microfinance, by providing financial services to the less endowed people, has created an assurance that many people will be able to improve their economic condition. it was in the 1990‟s that the establishment of Microfinance Institutions was formalized. However recent collapse of microfinance institutions have been disturbing and does not auger well both for the industry and customers alike. The year 2013 alone recorded a collapse of over 30 microfinance institutions with customers loosing monies in the region of billions of Ghana Cedis. It is for this reason this study seeks to find out the impacts of such collapses on the customers of microfinance institutions. The study identifies types of clients that was affected by the collapse of Microfinance Institutions, the media through which clients got to know of the collapse of Microfinance Institutions and assess the effect of the microfinance collapse on clients. To enable this analysis, 150 respondents consisting of customers of collapsed MFIs use through questionnaires. Descriptive statistics were used in the analyses; specifically pie charts, bar charts, tables, and cross tabulation using Statistical Package for Social Sciences (SPSS) software. The study reveals that most of the affected heard of the collapse of Microfinance Institution from the radio, and this reveals that the importance of radio in information dissemination in Ghana cannot be overemphasized. The Causes of the Collapse of MFI’s in Cape Coast were Overtrading, Poor Credit Appraisal, Diversion of Funds, Inadequate Monitoring of Loans, Willful Loan Default, Non-compliance with operational policy and Ineffective Board. it is therefore recommended that investigative measures by the media upon rumors of dangers of collapse of microfinance institutions will aid the Bank of Ghana, the clients of Microfinance Institutions and other stakeholders to be well informed about the actual state of affairs. This will go a long way to minimize the effect on the lives of clients.