Analysis of Non-Performing Loans (NPL) among Microfinance Institutions (MFIs) in Ghana: Evidence from the Kasoa Municipality

Abstract

The contributions of Micro-Finance Institutions (MFIs) to the Ghanaian economy can never be overemphasised. However, most of these institutions are faced with various challenges including non-payment of loans which constantly affect their operations and subsequently survival. As such, the study hinged on determining the non-performing loan (NPL) situations of Micro-Finance Institutions (MFIs) in Ghana focusing on four firms within the Kasoa metropolis, Central Region. The principal objective of the study was to determine the non-performing loan situations of 4 MFIs. The study adopted the both quantitative and qualitative approach and obtained a sample from 10 MFIs using the convenient (haphazard) sampling technique. The respondents comprised a branch manager, an executive director and two credit managers from each MFI. The data gathered were analysed using descriptive tools such as frequency table, bar charts and pie chart. The data was also analysed using narrations. Primary data collection instruments, specifically questionnaires were employed to gather data from the respondents. The study revealed the categories of loans existing in MFIs as well as those usually applied for, the factors accounting for non-performing loans, management of non-performing loans, sources of incomes and profits, impact of NPL on firms’ operations. The study concluded that NPLs is a challenge for MFIs especially those in Kasoa metropolis. Recommendations made were that, The MFIs should make conscious efforts to pursue the implementation of the existing safeguards as it will help address the NPL situation, Clients granted loans should be monitored to ensure that loans are used for intended purposes, Training programs should be organised to adequately equip staff that engage in granting and recovery of loans, There should be good client profiling to identify the economic conditions of clients, this will aid the charging of appropriate interest rate that will enhance loan repayment.