The failure of microfinance in Ghana: A Case Study of Noble Dream Microfinance Limited

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Date
SEPTEMBER, 2015
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Abstract
Micro-Finance Institutions (MFIs) play a pivotal role in the provision of services to the financially excluded population, particularly the poor and the informal sector. In spite of the anticipated and the actual role performed by the MFIs in Ghana in poverty alleviation, the industry has recently suffered nationwide collapses of some of its once vibrant institutions. Ghana has witnessed unprecedented collapses of MFIs neccessitating this research to unravel the root causes using the defunct Noble Dream Microfinance Limited as a case study. The purposive sampling technique was used to select former management staff of the company. Questionaire and interviews were used to solicit data and anlyzed using the Statistical Package for social sciences. Diversion of funds was found the highest rated factor that caused the collapse of Noble Dream Microfinance Limited. High interest rate and overtrading were the other leading causes of the company‟s collapse. It was also discovered that the MFI does not comply with various regulatory policies in their daily operations. The study recommended thatMFIs must ensure strict compliance with regulatory requirements. The regulator, the Bank of Ghana (BoG) in Ghana‟s case, has specific requirements for the operation of banking and non banking institutions, of whch MFIs are no exception. Particular requirements such as the preparation and submission of prudential reports, keeping the required reserves, exposures and even the sectors of credit administration are all crucial in ensuring growth and sustinability of MFIs in Ghana. The BoG, when furnished with such reports, would be informed and to provide intervension mechanisms to assist MFIs deal with threats of potential collapse before escalation to levels beyond control
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A thesis submitted to the Department of Accounting and Finance, School of Business, Kwame Nkrumah University of Science and Technology, in partial fulfillment of the requirements for the degree of Master of Business Administration (Finance),
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