Financial management practices, competitive advantage and loan performance of selected microfinance institutions (MFIs) in Ghana

Abstract

AbstractThis study examines how financial management practices and competitive advantage affect loan performance of microfinance institutions (MFIs) in Ghana's Ashanti Region. The research employs a cross‐sectional design with a sample of 85 Ashanti Region MFIs, following Krejcie and Morgan's guidelines for sample selection. Employing a positivist approach with quantitative analysis, primary data comes from closed‐ended questionnaires given to Credit Directors, Credit Department, and Risk Managers, selected randomly from staff lists. Results reveal financial management practices significantly impact loan performance and competitive advantage. However, competitive advantage, under controlled conditions, does not significantly predict loan performance. This highlights financial management's crucial role in shaping loan performance and competitive advantage in MFIs. The study suggests that sustaining growth requires Ghana's Central Bank to enforce adherence to standards for liquidity management. This research adds a fresh perspective to understanding financial management practices, competitive advantage, and loan performance in Sub‐Saharan Africa's MFIs.