Empirical Investigation Into the Consequences of the Banking Sector Cleanup on Microfinance Sustainability in Ghana

Abstract

The pivotal role of microfinance institutions in poverty reduction and inclusive development has garnered recognition, prompting extensive research into their economic sustainability. While existing studies focus on institutional and client factors, there's a notable gap regarding the impact of regulatory factors on economic sustainability. The recent microfinance sector clean-up by the Bank of Ghana provided an opportunity for this investigation. Using independent t-tests, the study assessed improvements in operating cost, operating income, and operating profit post-clean-up. Results reveal a lack of significant enhancement in operating costs and income, with a decline in operating profit. This suggests that regulatory measures in Ghana have not yet effectively promoted economic sustainability in the microfinance sector, emphasizing the need for a nuanced understanding of regulatory dynamics in fostering lasting impact.