The outgrowth of MFIs in Ghana is phenomenal. The popularity of MFIs is promoting other concerns into puting in the sector therefore increasing the Numberss annually. These MFIs are surprisingly able to pull and keep clients. Their successes could be attributed to the inventions employed. This survey investigated what the chief signifiers of inventions that the MFI employed were the effects on the public presentation of MFIs and what the challenges were therefrom.

The survey finds grounds that MFIs in Ghana do non by and large innovate through merchandises and supply concatenation. This is because MFIs merely supply loans at assorted rates collectible over a period of clip and besides because the bomber sector is emerging one which is still turning.

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The survey revealed that MFIs in Ghana innovate through procedure and selling. Marketing invention has been pursued overly by MFIs because they compete for clients. Procedure inventions have besides been undertaken with focal point on bettering velocity of bringing and quality of services. The impact of inventions on public presentation of MFIs was non decently identified in this survey. This is due to the limited signifiers of inventions adopted by the houses. However marketing invention was identified as holding a extremely positive consequence on increasing the client base of several MFIs. Process invention besides ensured that MFIs provided satisfactory services to clients by cutting down costs and seting MFIs in a favorable place.

The challenges identified were competition and high default rates. The deductions of these findings for stakeholders are that MFIs in Ghana should prosecute merchandise inventions sharply. Process inventions should besides concentrate on recognition analysis of clients to guarantee low default rates. MFIs in other states like the Grameen bank in Bangladesh have improved enormously through the acceptance of assorted signifiers of invention. MFIs in Ghana hence need to continuously invention in other countries to guarantee profitableness.


Chapter ONE

1.0 Background

In recent old ages the microfinance sector has been turning quickly in Ghana. The probationary registry of microfinance houses by the Bank of Ghana has listed 99 microfinance houses with 13 money loaning houses as at 2007 ( bog.gov.gh ) . They have significantly increased their loaning portfolios every bit good. Anecdotal grounds seems to propose that this growing in the sector is due to a high degree of invention among the microfinance houses in Ghana. Microfinance is a type of banking service that is provided to unemployed or low-income persons or groups who would otherwise hold no agencies of deriving fiscal services ( Morduch, 2000 ) . Ultimately, the end of microfinance is to give low income people an chance to go self-sufficing by supplying a agency of salvaging money, borrowing money and insurance ( ibid ) .

Harmonizing to Asiama and Osei ( 2007 ) microfinance consists chiefly of supplying fiscal services to micro-enterprises and to low-income families. These services include nest eggs, micro-credit, micro insurance, micro leasing and transportations in comparatively little minutess designed to be accessible. Microfinance has besides been complemented in Ghana by non-financial services, particularly developing ; to better the ability of clients to use the installations provided them efficaciously. In footings of the development of the microfinance sub-sector in Ghana, Asiama and Osei ( 2007 ) province that the construct has ever been in Ghana. It used to be called ‘susu ‘ which anecdotal grounds suggest evolved from northern Nigeria to Ghana. Over the old ages it has evolved from subsidised credits provided to little concern to the constitution of rural Bankss and presently the constitution of private microfinance houses with an act of Parliament underway to command the operations of these microfinance houses. The function of microfinance houses in making hapless people with support for their private enterprise is good documented ( Robinson 2001 ) . Steel and Andah ( 2003 ) have noted that, the diverseness of microfinance houses is facilitated by the handiness of a flexible regulative government which places fewer limitations than is the instance with commercial Bankss. Complex determinations have to be made in Ghana ‘s circumstance as to the timing and complexness of ordinances in order to promote orderly growing without overly smothering invention.

Invention has played a cardinal function in the development of the microfinance sector in many states. Hoque et Al ( 2011 ) have found that additions in cost of capital leads to higher cost of adoption, higher default rate and increased hazard. Again, increased usage of commercial debt and equity funding lowers productiveness for client-maximizing microfinance houses. This is through lower transition of rescuers to borrowers or the output rate. This suggests that mission impetus experienced by MFIs due to commercialisation is a incorrect bend for the industry. This has led to microfinance houses following a non-commercial attack to funding as an option to commercialisation. This is the instance in Ghana where official recognition strategies have been used to drive the microcredit strategies in the signifier of the Masloc programme and PAMSCAD recognition line. These non-commercial attacks are advanced methods that differentiate the microfinance sector from the banking and other non-bank fiscal establishments.

Megicks et Al ( 2005 ) have besides found that the attitudes and behaviors of directors, along with institutional features, are identified as influences on market orientation, service invention, client satisfaction and outreach public presentation within microfinance houses. Dusuk ( 2008 ) besides states that microfinance requires advanced attacks beyond the traditional fiscal intermediary function. Among others, constructing human capacity through societal intermediation and planing group-based loaning programmes are proven to be among the effectual tools to cut down dealing costs and lower exposure to legion fiscal hazards in relation to supplying recognition to the rural hapless.

1.1 Problem Statement

There are presently 25 Bankss in Ghana yet the per centum of the Ghanese public banked remains at less than 20 % ( Ghana Banking Report, 2011 ) . Despite the fact that most Ghanaians are unbanked most people are parading to microfinance houses for services. Narteh and Owusu-Frimpong ( 2011 ) suggests that Bankss are afraid of the hazard associated with banking the informal sector that constitutes a big ball of the unbanked in Ghana. Abor ( 2005 ) has opined that the ground for the fright is the hapless addressing system and a new recognition mention agency system in the state. In the thick of all these hazards micro finance houses have lent financess to hazardous persons and houses in the same economic system with same environmental conditions the Bankss dread. Asiama and Osei ( 2007 ) reference that microfinance houses have loaned out GHA?70.63 million in 2003 to GHA?72.85 million in 2004, proposing 3.1 per cent growing and extended GHA?160.47 million to clients in 2006 entirely, stand foring 48.8 per cent higher than the old twelvemonth ‘s entire loans and progresss granted by them. Anecdotal grounds seems to propose that microfinance houses are being more advanced than the traditional Bankss. As the 2011 Banking Report suggests the Bankss are doing more from imparting to authorities, therefore, there has been no demand to impart to the hazardous sectors of the economic system. In order to corroborate or disconfirm the anecdotal grounds that seems to propose that invention is the ground for the growing in figure of microfinance houses in Ghana, there is the demand to carry on a survey. This survey addresses this issue. The growing has non besides been investigated in the academic literature yet and more particularly in less developed economic systems like Ghana. The inquiry in the academic literature remains what theoretical accounts of invention history for the growing of microfinance houses. This survey hence seeks to place the assorted signifiers of advanced schemes adopted by MFIs in Ghana and how such inventions contribute to public presentation of such houses.

1.2 Research Aims

The aims of the survey are as follows:

To find the chief signifiers of invention among microfinance houses in Ghana.

The effects of invention on public presentation to find.

To place the challenges MFIs in Ghana face in the acceptance of invention.

1.3 Research Questions

The undermentioned inquiries will be explored in the class of this survey to be able to get at the aims stated below:

What are the chief signifiers of invention among microfinance houses in Ghana?

What are the effects of invention on public presentation of microfinance houses in Ghana?

What challenges do MFIs in Ghana experience in the usage of invention?

1.4 Significance of the Study

The survey will bridge the cognition spread on relationship between invention and public presentation among non-bank fiscal establishments particularly microfinance houses in Ghana.

1.4.1 The findings will inform microfinance houses as to what advanced schemes best work in the external environment and how these impact the public presentation of the microfinance houses in order to help fight.

1.4.2 The findings may be good to the mainstream banking sector in assisting them place advanced schemes that can enable them supply recognition to clients in the low income bracket.

1.4.3 For clients, the findings will edify them on the advanced mechanisms of microfinance houses in Ghana with a position to enable them demand more by manner of client service from those entities.

1.4.4 The findings will be good to the Bank of Ghana in its monitoring and regulative maps of microfinance houses in Ghana. It will enable it modulate and convey saneness into the operations of MFIs in Ghana.

1.4.5 The survey will besides lend to the argument of microfinance as engines of development in less developed states in general, and Ghana in peculiar, as beginnings for support for micro-enterprises and eventually, organize the footing upon which future research will be conducted in academe.

1.5 Restrictions of the Study

The research was encumbered by a figure of factors. These are ;

1.5.1 Finance. The budgetary restraints for the survey limited the survey to the extent that the trying techniques employed may non be brooding plenty of the population.

1.5.2 Time. Time was of great kernel. The impulse to finish the work on agenda militated obviously against the ability to carry on a more punctilious and comprehensive work.

1.5.3 Access/Privacy of informations. Respondents were loath to offer information because they did non desire information about their concerns to acquire to 3rd parties, the Bank of Ghana and their rivals. This in a manner affected the findings and later, the recommendations.

1.6 Administration of the Study

The survey was structured into five chapters. Chapter one presents the background, job statement, aims, significance of the survey, restrictions and organisation of the survey. Chapter two reappraisals related literature on both theoretical and empirical evidences. Chapter three provides the inside informations of the methodological analysis used for the survey ; this includes how information was gathered and analysed. In chapter four the consequences of the analysis were presented and discussed. Finally, chapter five includes the sum-up, decisions and recommendations drawn from the survey.

Chapter TWO


2.0 Introduction

In this chapter, extended reappraisal would be carried out on the bing literature on invention and its acceptance in the microfinance sector. Attempts would besides be made to discourse the theoretical and conceptual model underpinning invention in the microfinance sector of the Ghanese economic system. Academic literature by and large ( Asiama and Osei, 2007 ; Morduch, 2000 ) have espoused microfinance as supplying the invention needed to function hapless markets. This subdivision of the thesis presents literature reappraisal of invention within the microfinance sector and develops a conceptual model that will steer the survey.

In recent old ages, since the Grameen Bank was established by Mohamed Yunus in Bangladesh, microfinance has come to the bow of poorness decrease in many states. This funding attack has been mooted by supranational establishments such as the World Bank and the International Monetary Fund ( IMF ) . MFIs have non overcome traditional Bankss in footings of recognition mobilization and that may non go on sing the fact that most MFIs bank with traditional Bankss and have their histories with these Bankss. The sum of mobilization by MFIs will hence be a subset of the traditional Bankss. However, when the MFI mobilizations are disaggregated from that of the traditional Bankss it is most likely that these will be near to those of the traditional Bankss. It will take perchance the following decennary for them to transcend the Bankss ; even that becomes a distant possibility when we consider that some of these MFIs may turn to go Bankss in themselves particularly the good structured 1s. However, formal mobilization by MFIs seems to propose strong mobilization of financess as Asiama and Osei ( 2007 ) supply the fact that most MFIs in Ghana seem to work in the informal sector.

2.1 Invention

Invention may be defined as working new thoughts taking to the creative activity of a new merchandise, procedure or service ( Trott, 2008 ) . It must be emphasized that though the creative activity procedure and its result are of import, it must travel a measure farther the invention processing compasses pull offing restructuring and technological alterations. Following from this therefore, invention could connote the development of new engineering with a position to making new value in order to convey alterations to the society. While many organisations acknowledge that invention is of import to their growing and success, the term “ invention ” is still without a consistent, agreed-to definition in the concern universe.

There is a thin line between innovation and invention. Invention could be said to be the creative activity of new procedures, merchandises or thoughts. Invention on the other manus could be said to be the existent application of the freshly created procedures, merchandises or thoughts on the organisation ‘s operations. For organisations to win hence, it must continuously use innovation and invention to its operations.

2.2 Types of Invention

Research workers have identified many types of invention such as Product Innovation that entails the debut of a new merchandise or a service that is new or well improved ; Process Innovation consisting the execution of a new or a significantly enhanced production or bringing method, Supply Chain Innovation in which inventions transform the sourcing of input merchandises from the market and the bringing of end product merchandises to clients and Marketing Innovation which consequences in the development of new methods of marketing with sweetenings in merchandise design or packaging, its publicity or pricing, among others ( hypertext transfer protocol: //www.paggu.com/getting-into-roots/what-is-innovation-why-innovation-is-important/ ) . [ Accessed on 20th July 2012 ]

2.2.1 Product Invention

This is the development and market debut of a new, redesigned or well improved merchandise. Examples of merchandise invention by a concern might include a new merchandise ‘s innovation ; proficient specification and quality betterments made to a merchandise ; or the inclusion of new constituents, stuffs or desirable maps into an bing merchandise.

2.2.2 Process Invention

Process invention means the execution of a new or significantly improved production or bringing method ( including important alterations in techniques, equipment and/or package ) . Minor alterations or betterments, an addition in production or service capablenesss through the add-on of fabrication or logistical systems which are really similar to those already in usage, discontinuing to utilize a procedure, simple capital replacing or extension, alterations ensuing strictly from alterations in factor monetary values, customisation, regular seasonal and other cyclical alterations, trading of new or significantly improved merchandises are non considered inventions. ( http: //www.innoviscop.com/en/definitions/process-innovation ) [ Accessed on 20th July 2012 ]

2.2.3 Supply Chain Innovation

Supply concatenation invention is about using best patterns and technological inventions to better a house ‘s supply concatenation in order to cut down such rhythm and delay times and other waste ( to utilize a Thin term ) in in-house procedures. ( http: //thegentleartofsmartstealing.wordpress.com/types-of-innovation/ ) [ Accessed 20th July 2012 ] . This should hold an ultimate end of bettering the client experience. This gives clients more pick, more truth, faster order fulfillment, increased visibleness and better service by looking at countries in a houses supply concatenation that can be improved.

2.2.4 Marketing Invention

It is defined as a portion of concern exchange which covers how the industry is germinating in the face of new engineering and ways of pass oning. This covers the new invention in marketing from new tools to how people rethink how to acquire their messages out. Marketing invention helps to retain old clients and besides to pull new clients.

2.2.5 Models of Invention

Traditional statements about invention are centred on two statements: the deterministic and individualistic schools of idea. The deterministic school of idea emphasizes the function of external influences such as human ecology, economic sciences and civilization in the realization of inventions while individualistic idea emphasizes the alone single endowments as footing for inventions. Over the last two decennaries nevertheless the literature on what drives invention has been either market-based position or resource-based position ( Trott, 2005 ) . The market-based position holds that market conditions form the context within which inventions take topographic point. The resource-based position nevertheless contends that markets are dynamic and can non organize a strong footing for inventions and that the alone competences, resources, capablenesss and accomplishments of the house are what drives invention. Within these arguments nevertheless ; there are general theoretical accounts of invention that have come to be accepted as strong footing and beginnings of invention. These are:

2.2.6 Serendipity

Serendipity is the ability of doing inadvertent but causeless finds, particularly while looking for something wholly unrelated. Many inventions are related to opportunity, a set of causeless conditions ( happy or unhappy ) . However, opportunity is non plenty. Knowledge and experience are necessary to transform the set of conditions into invention. This is the construct behind the word “ serendipity ” . Three types of Serendipity can be identified. These are:

Discovery that was non sought ( eg. Velcro )

Discovery that was being sought, but found in an unexpected manner ( eg. vulcanisation )

Discovery, whose usage is different than originally planned ( eg. Post-it )

Serendipity is a manifestation of creativeness in which inspiration comes from outside. Therefore, the unfastened attack of invention for a company increases serendipity and therefore invention. Large companies have begun to systematise this attack. For illustration, Procter & A ; Gamble, one of the leaders in footings of unfastened invention, have deployed their “ Connect & A ; Develop ” , which allows the group to link its internal research with unexpected chances offered by an external web of experts. ( http: //open-your-innovation.com/2010/04/25/serendipity-and-innovation/ ) [ Accessed 22nd July 2012 ]

2.3 Linear Models

One of the first ( theoretical ) models developed in history for understanding scientific discipline and engineering and its relation to the economic system has been the additive theoretical account of invention. The theoretical account postulated that invention starts with basic research, followed by applied research and development, and ends with production and diffusion.

Basic research a†’ Applied research a†’ Development a†’ ( Production and ) Diffusion. ( Trott, 2008 )

Harmonizing to the additive theoretical account, invention takes topographic point in distinguishable and consecutive stages. Research is considered to be the initiating measure and the beginning of all inventions. The additive theoretical account suggests that the sequence from research through development to production is a standard and prevailing way of invention in both houses and national economic systems, and no feedback function is built into the system. The additive theoretical account has besides been used as a justification for making basic scientific discipline research globally and provides the conventional wisdom which underlies myost policy believing about engineering development and economic growing.

The Linear theoretical account is the foundation of present theoretical accounts for roll uping statistical information on research activities, for forming economic research on the societal benefits of scientific research, and for explicating the function of scientific discipline in industrial invention ( Rothwell and Zegveld 1985 ) . Consistent with the additive theoretical account of invention, scientific discipline and engineering ( S & A ; T ) policies have evolved which have long focused chiefly, possibly entirely, on government-funded R & A ; D, whether conducted at authorities research labs or in universities. Combined with the economic principle of ‘market failure ‘ and Keynesian economic policies, which justified authorities intercession to raise and prolong the degree of end product and employment and to forestall another depression, authorities grants for research and development remain a popular policy in maintaining with the Linear theoretical account.

However, there is turning unfavorable judgment of additive theoretical account. As a model for categorising the procedure of cognition creative activity, the additive theoretical account diverts attending from the economic and societal determiners of scientific research activity. As a theory of cognition production, the additive theoretical account ignores the function of engineering in determining the purposes, methods, and productiveness of scientific discipline and neglects the non-scientific beginnings of many technological developments. As epistemology, the additive theoretical account creates differentiations that closer scrutinies of scientific and technological activity fail to corroborate. In add-on, the additive vision of invention dominates besides the regional invention capableness ratings.

2.4 Coincident Matching Model

This theoretical account recognizes interaction between different elements and feedback cringles between them, accent on incorporating R & A ; D and selling. A coincident yoke theoretical account, the 3rd coevals invention theoretical account, was created during 1970s, when many surveies showed that the invention procedure was much more complex than old additive theoretical accounts had described ( Trott 2005, Figueroa and Conceicao 2000 ) . The coincident matching theoretical account suggests that the invention procedure is the consequence of coincident yoke of cognition within all three maps: R & A ; D, fabrication and selling ( Trott 2005 ) .

2.5 Synergistic Model

This theoretical account combines push and pull theoretical accounts, integrating within house, emphasizes on external linkages. The synergistic theoretical account of invention ( besides known as the chain-link theoretical account presented by Kline and Rosenberg ) , is a alteration of the old additive theoretical accounts and combines both the engineering push and the market pull positions ( Rothwell and Zegveld 1985 ) . It besides contains similar elements as the coincident yoke theoretical account ( Kline & A ; Rosenberg 1986 ) . The theoretical account is a logically consecutive – though non needfully uninterrupted – procedure that can be divided into functionally distinguishable but interacting phases. Although this synergistic theoretical account resemble the additive theoretical accounts, the flow of information is non necessary linear. There are complex links and feedback relationships within the company and besides between the company and the environing scientific discipline – engineering system ( Roberts 1998 ) . The coevals of thoughts is based on three basic constituents: organisation capablenesss, demands of the market, and scientific discipline and engineering. The overall procedure is complicated and through efficient direction companies will be able to make successful inventions ( Trott, 2005 ) .

2.6 The Idea of Microfinance

Harmonizing to Asiama and Osei ( 2007 ) microfinance consists chiefly of supplying fiscal services to micro-enterprises and to low-income families. These services include nest eggs, micro-credit, micro insurance, micro leasing and transportations in comparatively little minutess designed to be accessible. Christen et Al ( 2004 ) have described microfinance is a motion whose object is “ a universe in which as many hapless and near-poor families as possible have lasting entree to an appropriate scope of high quality fiscal services, including non merely recognition but besides nest eggs, insurance, and fund transportations ” . The disciples of microfinance therefore believe that its aim is to assist hapless people transit out of poorness. Others consider microfinance as a agency to exciting economic development, easing unemployment and heightening growing through the support of little enterprisers and concerns. ( Feigenberg et al, 2011 ) .

Microfinance ( MF ) is the merchandise of new thought and pattern in development economic sciences. Microfinance motion is nil short of a revolution in developmental finance ( Hans, 2009 ) . For the development states, it has come as a discovery in the doctrine and patterns of poorness obliteration, economic authorization and inclusive growing. Their function is nobler as they do “ banking for the hapless ” . They have besides contributed to pecuniary liquidness and stableness in the economic system. But we need to re-examine their function and public presentation non merely in footings of the professed aim of poorness obliteration but besides in footings of the end of human development. They need to attest their functionality and public presentation in the kingdom of societal capital. They need to warrant their presence and maps for socio-cultural development of the state and how they can make this through societal intermediation.

The differentiation between microfinance and micro recognition has to be underlined. Specifically, microfinance refers to loans, nest eggs, insurance, transportation services and other fiscal merchandises targeted at low-income clients whereas micro recognition refers to a little loan to a client made by a bank or other establishment. Micro recognition can be offered, frequently without collateral, to an person or through group loaning. Christen et. Al. ( 1984 ) have viewed the microfinance motion as an environment in which as many hapless and near-poor families as possible have lasting entree to an appropriate scope of high quality fiscal services, including non merely recognition but besides nest eggs, insurance, and fund transportations. It is therefore the proviso of a board scope of fiscal services such as sedimentations, loans, payment services, money transportations and insurance to hapless and low income families and their micro endeavors ( Sriram and Kumar, 2007 ) .

Microfinance clients fall in the low-income bracket of the society. This scope of people has small or no entree to recognition from the mainstream banking sector. They are largely found in the non-formal sectors of the economic system. They are freelance, and in most cases place based little graduated table enterprisers. In rural colonies, microfinance clients can be chiefly found in the agricultural sector. Some venture into little scale nutrient processing on a really minor graduated table. Others are into junior-grade trading. In urban countries, the economic activities engaged in by microfinance clients are varied. These activities range from store maintaining, artisanship, little scale fabrication among others. In the simplest footings, microfinance is “ banking for the hapless ” and covers micro recognition, micro nest eggs, micro insurance and remittals ( Kandelwala, 2007 ) . The Asian Development Bank defines Microfinance as the proviso of a wide scope of fiscal services such as sedimentations, loans, payment services, money transportations, and insurance to hapless and low-income families and, their micro endeavors ( ADB, 2000 ) . Ledgerwood defines microfinance as the proviso of fiscal services like nest eggs, recognition, insurance and payment services to low-income clients, including the freelance ( Ledgerwood, 1999 ) . Even the World Bank feels that the hapless, i.e. the mark clients of microfinance, demand and utilize more fiscal services than merely micro loans. In a state of affairs fiscal crisis or fiscal market failure compounded by moral jeopardy, the MFIs semen in ready to hand. MFIs overcome fiscal market imperfectnesss through group loaning patterns in which borrower ‘s associates become co-signers to the loan. The legion mechanisms of a MFI facilitate effectual recognition proviso. The MFIs are able to offer non-credit fiscal services such as nest eggs agreements to hapless people.

2.7 Challenges of Microfinance

In rule, the mainstream Bankss have been loath in the proviso of fiscal services to clients who do non hold a steady flow of income or well valued collateral. In client history direction, Bankss incur some cost. These costs are irrespective of the sum involved. The cost of treating loans for illustration includes a examination of the possible client with regard to his creditworthiness, ability to pay, other debt duties, adequateness and suitableness of collaterals among other considerations. Ledgerwood contends that there is a break-even point in supplying loans or sedimentations below which Bankss lose money on each dealing they make ( Ledgerwood, 1999 ) . Poor people by their income degrees surely fall below that breakeven threshold. In add-on, most hapless people have few assets that can be secured by a bank as collateral. As documented extensively by De Soto ( 1989 ) , even if they happen to ain land in the underdeveloped universe, they may non hold effectual rubric to it. This means that the bank will hold small resort against defaulting borrowers. Seen from