Abstract
A number of Microfinance Institutions (MFIs) both in Ghana and in other countries have had risk-related challenges that have affected their sustainability. In recent years, strategic decisions of risk have affected MFIs operations in Ghana significantly. This paper seeks to demonstrate the relationship between risk factors and MFIs sustainability in Ghana. The paper adopts a quantitative strategy for the data source with a deductive approach. The hypothesis carried out on various drivers of sustainability were upheld with a significant p-value of 0.000 < 0.01p and concluded that all the drivers of sustainability identified have a significant effect on MFIs sustainability in Ghana. The measurement model and structural model of the Partial Least Square Structural Equation Model (PLS-SEM) was used to measure the relationship between risk and MFIs sustainability. The path coefficient between risk factors and the drivers of MFIs sustainability was 0.582 with a significant p-value of 0.000 < 0.01. This establishes that risk factors have a significant effect on all drivers of microfinance institutions sustainability. Operators of microfinance in Ghana need to take an appreciable and well-managed level of risk to enhance their sustainability. Keywords : institutions, microfinance, risk, sustainability DOI : 10.7176/JESD/10-12-11 Publication date :June 30 th 2019
Highlights
Microfinance Institutions (MFIs) have been part of the financial sector in Ghana and are making a significant impact on the low-income earners and the rural poor
The hypothesis carried out on various drivers of sustainability were upheld with a significant p-value of 0.000 < 0.01p and concluded that all the drivers of sustainability identified have a significant effect on MFIs sustainability in Ghana
Based on various arguments and studies put forward in risk management, we propose that risk management has a significant effect on MFIs sustainability in the following hypothesis: HRM
Summary
Microfinance Institutions (MFIs) have been part of the financial sector in Ghana and are making a significant impact on the low-income earners and the rural poor. Their operation promotes economic development, job creation, and poverty alleviation. Some of the drivers that sustained MFIs in Ghana are judicious risk management, skilled management, effective regulation, good corporate governance, liquidity, to mention a few. It is in light of the forgoing’s that this paper seeks to demonstrate an existing relationship between risk factors and MFIs sustainability in Ghana
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