Regulation, Supervision, and Access to Microfinance: The Case of Ghana

This paper discusses some of the regulatory and supervisory measures that affect access of the poor to financial services in Ghana. The paper examines:

• The structure of Ghana's financial institutions:
  • Formal institutions: the banks, including the "Rural and community Banks (RCBs)" and non-bank financial institutions such as the "Savings and Loans Companies (S&Ls)";
  • Semi-formal financial institutions: credit unions and non-governmental organizations (NGOs);
  • Informal institutions: "Susu Collectors", and traditional moneylenders.
• Regulatory and apex structures:
  • The Bank of Ghana (BoG): regulates formal institutions;
  • The ARB Apex Bank: performs a number of apex functions;
  • The Ghana Cooperative Credit Unions Association (CUA): undertakes promotion and self-regulation of credit unions;
  • The Ghana Cooperative Susu Collectors' Association (GCSCA);
  • The Ghana Microfinance Institutions' Network (GHAMFIN): an apex association of the financial NGOs.
• The extent of regulation:
  • NGOs and Susu collectors are not subject to external regulation;
  • The financial NGOs could transform into S&L companies by mobilizing savings from the public.
• Issues in regulating RCBs: Conflict between the RCBs and the BoG about:
  • Serving the urban poor;
  • Raising the secondary liquidity reserve requirement.
• Poverty outreach: RCBs have the largest outreach.

 The paper concludes that the BoG has been using its regulatory powers judiciously to enhance the access of the poor to financial services. BoG's choice not to directly supervise the credit unions, financial NGOs and the Susu Collectors help them to be innovative in developing products that can serve clients not reached directly by the RCBs.