Microfinance Groups To Take Measures To Cut High Loan Default Rates

Ghana Cedi
Ghana Cedi

A financial and investment expert says Microfinance Institutions in the country will have to strengthen their credit risk analysis and finance performance systems to reduce the high non performing loans.

Ghana Cedi
Ghana Cedi

The Microfinance sector is said to have between 16% to 20% loan default rates for non performing loans annually resulting in the closure of some institutions. According to the Ghana Association Microfinance companies (GAMC) high default rate in the microfinance sector is due to the failure of borrowers to repay their loans. Speaking to Citi Business News a financial and Investment Expert Afua mensah Bonsu says microfinance institutions must focus on knowing the customer and what their peculiar needs are so as to reduce the high default rate among borrowers.

?The high default rate is going to affect their profitability, depending on how widespread this is it possible that some of the firms could run down. This could also cause some problems in the industry, in that individuals who have funds with such institutions that may see this problem would want to redraw their funds and this could cause some sought of panic situation in the country.?

Afua Mensah Bonsu says Microfinance institutions must get to know their customers especially borrowers so as to help them to ensure that they repay the loans they contract. She therefore could on the regulator Bank of Ghana to strengthen their supervision of the industry, helping them to reduce the high rate of nonperforming loans.



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