A microfinance monitoring visit took me to Yendi in the Northern Region of Ghana, where we visited microfinance groups which benefited from microfinance loans from a rural bank.

The groups were mainly women involved in various economic activities. I remember the excitement on the faces of the women who had been granted an opportunity, to access micro-loans that would enable them to invest in their businesses.

One very remarkable experience from the visit was when the group members informed us about one member who was dreaming about buying herself an airplane. This woman had told the other women that she was going to buy an airplane and fly the group- members around the world.

That was a dream by a micro client, and the other group members gladly told me about it. It was funny to hear, but then when the whole idea sank further, I saw something positive about the woman’s dream. I saw a woman who was able to dream big because of the opportunity created through an effective microfinance programme.

Clearly, with the right microfinance methodology, low income and poor clients can dream about securing a better future for themselves and their families. While we were engaging the group members, the woman who was dreaming of buying the airplane appeared and gracefully walked to take her seat. Just as she entered, the rest of women shouted, “This is the woman who says she will buy the airplane”.

The woman confidently responded and said, “Yes, I will buy an airplane and I will put my group members on board”. I smiled as I saw the hope that microfinance had brought to the women who gathered to think about their businesses.

I brought up this single amazing story of a beneficiary of microfinance to demonstrate how it can be used in helping poor clients to start dreaming once they are given the opportunity to change their lives through access to loans and other financial services.

Rural Community Banks (RCBs) are key to an impactful microfinance programme and most RCBs are currently focusing on microfinance services as a means to reboot their banks’ performance, especially after the onset of the coronavirus pandemic. For most RCBs, an effective microfinance programme has practically provided an avenue to improve their revenue as well as reduce the non-performing loan portfolios.

RCBs are an important aspect of the entire financial system in Ghana. This industry has the potential of improving financial access for low-income and poor clients, who are largely found in the rural economy of Ghana and in areas where other financial sector players will not find economically viable to operate.

Considering the value of Ghana’s microfinance sector to poverty reduction and livelihood empowerment, RCBs hold the potential of helping to put Ghana’s microfinance sector back on track, so they are able to do what only microfinance institutions can do to push the ends of our development agenda.

The following points are my thoughts on how to make microfinance impactful within the rural banking sector:

Ghana’s Microfinance Regulations

Generally, Ghana’s microfinance sector needs a regulatory framework that is cut out for microfinance management. Even though the current microfinance

sector is regulated, the regulation is borrowed from the traditional regulatory framework used for regulating banks. This form of regulation does not consider the unique complexities of microfinance operations and this also has translated into how microfinance programmes are monitored and managed at the rural bank level.

For example, traditional regulation does not really focus so much on social impact but on the financial soundness of the institutions or the financial sector. Microfinance operations must consider social as well as financial objectives. Returns on RCBs investments must therefore include key microfinance indicators that can be useful for measuring the performance of microfinance activities within the rural banking sector.

The thinking is that microfinance is just like any other banking service or micro-banking can be identified as one reason why Ghana’s microfinance sector witnessed a situation where owners and key managers of MFIs retired from the traditional/high- street banks to work within the microfinance space without having the skills needed for managing microfinance programmes.

This development can be seen as one of the several factors which negatively affect the advancement of microfinance operations in Ghana. At least, from evidence, it is now clear that microfinance management is not ‘mini-banking’ and therefore must not just be managed as banks with people having only banking skills or qualifications. RCBs must

therefore ensure that they train their staff who are directly or indirectly involved in the management of their microfinance programmes to help promote effective and impactful microfinance programmes that go beyond profitability.

Expand the concept of financial inclusion beyond Fintech

Financial inclusion is aimed at providing appropriate financial and non-financial services and products to non-bank and underbanked populations, so as to ensure that these products and services are competitively priced, with the products being relevant to meet the needs of the poor or low-income earners. Ghana, through the advancement of technology, is currently experiencing a drastic growth in the use of mobile money platforms for banking services. This has been made possible through the efforts of Mobile Network Operators (MNOs) as well as Fintech Companies.

Piggybacking on the network of MNOs, Ghana has recorded an impressive mobile money growth with increasing deposits and user indicators. This impressive mobile money growth indicator is one major driver for making financial services available to a majority of the population. From this evidence, it is clear that FinTech and technology-aided platforms can help drive the financial agenda.

Clearly, on the back of technology, RCBs can scale up and increase access to financial services.

However, it is important for the sector and players to intentionally look at how to translate all these growths to ensuring that the targeted clients, low-income and poor clients, have the right products to help them take advantage of economic opportunities. ARB Apex Bank and the RCBs must not drive financial inclusion agenda without having strengthened the microfinance actors since they serve as source of information, training, and consulting centre clients. When the key microfinance officers interact with clients, they provide more than just deposits, loans, or cash withdrawal services to the clients, something that technology is yet to do for the clients. The officer- client interactions can help the low-income earners and poor clients to be effective users of financial services.

Confidence boosting

Banking generally thrives on confidence and rural banking must be positioned to exude confidence. Currently, the confidence level for microfinance operations in Ghana has dipped, especially in the case of deposit- taking microfinance companies.

This development can partly be ascribed to reported cases of MFIs absconding with clients’ deposits, or their inability to repay clients. Additionally, the unintended outcome of the banking sector clean-up also led to some loss of confidence.

The good news is that there is a general restoration of confidence in the financial sector, due to the roles of other players like the rural banking sector, who serve as reliable alternatives for most of the clients who had challenges with the MFIs.

There is the need for the rural banking sector to further improve the customer confidence level and the confidence of the general public so as to reposition the sector as the most reliable financial services outlet for an impactful financial inclusion within Ghana’s financial sector. This can be done well if RCBs focus on retooling their microfinance operations as well as obtaining the needed liquidity to meet loan and deposit demands.

For now, the rural banking sector stands tall in the achievement of a deeper depth of outreach when it comes to financial and non-financial services in Ghana, even without technology, RCBs are noted for serving the poorest of the poor.

Microfinance operations must remain ‘microfinance’ operations

One of the challenges of Ghana’s microfinance sector is the desire of some players to look like banks in their operations. This has affected the general outlook of Ghana’s microfinance, leading to some operators of microfinance services developing appetites for huge loans, thereby increasing their cost of operations.

RCBs implementing microfinance programmes should focus on ‘microfinance’. They must develop the right systems, lending methodologies, and tools which will enable them to provide effective microfinance services to the targeted micro clients.

They must understand the microfinance market and know the key characteristics of micro clients. Understanding your market and client well can help RCBs develop the right products and systems to help them achieve the right mix of outreach, sustainability, and impact through their services. If RCBs fail to target the right clients, the unbanked or underbanked, clearly, these clients will not be targeted by the high street banks and the overall objective of financial inclusion will be derailed.

Conclusion

Ghana’s rural banking sector is an important element within the overall financial sector ecosystem. This class of financial service providers offer an array of financial serves to low-income and poor clients, which has evidently contributed to improving the livelihoods of target beneficiaries. While we see a great enabler in technology as developed and deployed by Fintechs, it is important that we develop a good collaboration between technology and human interface banking to achieve the full benefits of financial inclusion. We must therefore take the needed steps to build the microfinance operations within the rural banking sector so that it can become the foundation to drive