Abstract
In view of the clear deficiencies in the cited researchers’ findings, there is the need to conduct new research to assess risk exposure of credit providers in micro financing in Ghana using Accra Metropolis, Ghana as a case study. The principal approach used for this analysis was a questionnaire-based survey. 120 workers and managements of Microfinance institutions responded to questionnaires made up of 9 questions. The analysis of the responses from the survey conducted was done using descriptive statistics. The results from the study shows that there is significant relationship between bank performance in terms of profitability and credit risk management in terms of loan servicing performance. The results verify the hypothesis that better credit risk management results in better bank performance. Accra Metropolis, Ghana is a city with challenges in the likes of the springing up of new micro finance and micro finance facilities. The study found that the microfinance institutions surveyed are aware of the types of risk inherent in their business line and use risk management approaches in different ways to reduce losses and increase profitability. Therefore, a more comprehensive assessment of risk exposure of credit providers in micro finance within the Accra Metropolis, which when not done will lead to a further fall in their performance standards as financial service providers. Keywords: Risk Exposure, Credit Providers. Microfinance in Ghana DOI: 10.7176/RJFA/11-16-03 Publication date: August 31 st 2020
Highlights
Robinson (2001) posits that the 1980s marked a turning point in the history of microfinance, since MFIs such as the Grameen Bank began to demonstrate that they could provide small loans and savings services on a large scale in a profitable manner and did not receive ongoing subsidies, were commercially funded and fully sustainable, and were able to reach broad customer reach
This research takes a fast look on risk exposure, of credit providers in the micro finance sectors
According to Weiss & Montgomery (2005) Lack of access to credit can be understood in the absence of collateral for conventional financial institutions, coupled with the various difficulties and high costs involved in dealing with large numbers of small, often illiterate borrowers
Summary
Robinson (2001) posits that the 1980s marked a turning point in the history of microfinance, since MFIs such as the Grameen Bank began to demonstrate that they could provide small loans and savings services on a large scale in a profitable manner and did not receive ongoing subsidies, were commercially funded and fully sustainable, and were able to reach broad customer reach. The present possibility for micro finance to diversify into broader range of services and products make life really cool for micro financing entrepreneurs and managers This diversification advantage is a once in a life time opportunity that should be consumed with some caution and prudence as this involves a great deal of risk. According to Llanto (2001) Credit granting NGOs, credit cooperatives and, to some degree, a few rural banks have used microfinance as a competitive tool to provide basic financial services to small lenders, the wide network of microfinance institutions' low-income clients shows that there is a great demand for credit from the poor and that they can use these small loans successfully to earn income. According to Weiss & Montgomery (2005) Lack of access to credit can be understood in the absence of collateral for conventional financial institutions, coupled with the various difficulties and high costs involved in dealing with large numbers of small, often illiterate borrowers
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