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Print Email. Both the challenges of regulations and microfinance The Financial regulations in the country also are faced with institutions need to be addressed by the institutions with the challenges such as cost of regulations, inadequate knowledge support of the government and other key stakeholders of the on regulations procedures, inadequate staff to regulate all institutions to be able to tend all the challenges into microfinance, political influence, poor information opportunities for the sectors to be in a long term operation dissemination, difficulty dealing with microfinance and serve the purpose of their establishment in the country.
In the study of Ussif and Ertugrul reveal financial sector, uncertainties, transforming the effectiveness that microfinance has impacted significantly and positively and sustainability of the sector and reforming regulatory www.
Due to the Adjei in their study concluded that the challenges above-indicated role of Microfinance institutions and that microfinance industries are facing in not only Ghana but financial regulations in a country, the institutions must be other developing countries too include: the problem of protected and the necessary measures towards sustaining capacity building.
Lack of adequate infrastructure, poor and them. They list some challenges their demands and needs for these types of services. The The methodology of this article is solely qualitative. Some of the responses were audiotaped whilst others Policymakers from the Ministry of Finance were interviewed were written in a booklet. The participants' responses were using an interview guide. Other data were gathered from transcribed, coded, narrated, interpreted, and analyzed management and employees of the microfinance institutions, qualitatively using Thematic Analysis.
The questions were The tables below, table 1 to 5 gives a summary of all the asked to solicit the respondents' views on the challenges that findings of the challenges microfinance institutions' and the microfinance institutions and financial regulators faced, financial regulators faced, how to overcome the challenges, how to overcome those challenges, what they think are the and finally, the prospects of microfinance institutions.
Is there anything they think the government and According to the respondents from the findings, the the management of the various institutions can do to help internal challenges microfinance institutions faced in Ghana minimize the challenges for the institutions to function as include the listed in table 1 below. Also, the respondents' responses and www. Understanding of MFIs Concepts From the interviewees' responses, the following 15 Mismanagement by Managers factors would help to overcome the challenges facing Source: Primary Data, financial Regulations and microfinance institutions in the Table 2: External Challenges Facing Microfinance country.
Institution in Ghana. No Overcoming Microfinance and Regulations During the interview, the interviewees made Challenges in Ghana mentioned the following factors in the ensuing table as the 1 Reduce the Cost of Regulations external challenges the microfinance institution faced in the 2 Sufficient knowledge on regulations procedures country.
This could be from the microfinance software. In case the records of the institution financial regulators who regulate, supervise and monitor the are not kept properly, it can cause problems. The researcher activities of the institutions, the policy-making bodies who also observed that most of the information of the customers formulate and implement the policies of the institutions, the was written in booklets and later entered into the computer.
From the findings, the below to internal challenge in the sub-sector. The Aspect A microfinance institution in Brong Ahafo Region customers are also banking with the institutions but Techiman , one of the internal challenges of microfinance lack knowledge and understanding of the dealing of institutions is credit default by the customers of the the institutions.
Default BZ a year-old accounting and finance manager at Aspect in loan repayments leads an institution to a A microfinance institution also mentioned that: standstill. It brings about the collapse of the The majority of the managers mismanage the institutions especially when the default rate is high.
They do not handle the institution like The loan issued out and the interest that comes with their own property and asset but rather sees it as it is what the management utilizes and gives to someone else property.
Some even engage in other customers as loans and the money is from the dubious businesses that are not part of what the small depositors who save their monies for safety institutions are licensed and registered to do. Most and come for it as in when they needed it.
When management ended up doing whatever businesses this happens, the institutions cannot even pay their come onto their way without weighing the pros and clients depositors and this again leads to the cons of the business. FB from the Ministry of Finance mentioned Poor These are the main reason why regulators and policymakers records keeping as another internal challenge that the are important for every functioning financial institution to microfinance institution is facing in Ghana.
The accounting and financial regulators, policymakers, and owners. He said there should be a unique software for usage and keeping of information and data by the The external challenges of microfinance institutions microfinance institutions for security reasons but are the most serious challenges faced by institutions. These most of the institutions are lacking this. This is a are the challenges that the institution is not having full serious challenge faced by most of the institutions control over.
Government intervention. While some can be rectified by the management of the institution others are beyond their During the field interview with the respondents, we observed capability. The respondents during the interview mentioned that some staff of the sector when asked how they keep their some of the external challenges of the microfinance sub- records, mentioned manually, and others also said both sector to include the discussed factors below.
Few mentioned the use of a www. The rate at which banks and external challenges facing MFIs as, lack of infrastructural, microfinance institutions compete among and panic withdrawal by the customers as a challenging themselves is making it a big challenge for the factor. Lack of access to roads, social amenities, and the like are difficult factors and We observe that competition to some extends puts the reasons why the institutions cannot open other management and other employers on track to work diligently branches in rural communities.
The customer base to serve their customers best. Some Again, the default rate of some of the loan of the institutions and regulators always fight over beneficiaries makes it challenging for microfinance regulatory reporting or procedures and some institutions to pay all the customers their savings management are afraid to hear that regulators are due to lack of enough funds at their disposal and so visiting them. All this is due to the way they work some customers' due to words of mouth and deal with issues.
The staff who work well have advertisement about the poor performance and nothing to worry about the coming of regulators to attitude of the Banks towards the customers, some monitor and supervise them. Most of the also rash for their monies. These bring a lot of management also complain about the laws, rules, queues at the premises of the Banks as customers all and demands of the regulators.
They also complain are demanding their entire deposit, even those who about the reporting procedure being cumbersome invested the monies still needs their monies and and gargantuan beyond their wish. Some again wish cannot wait for maturity. These were the ideas and views of regulators as a challenge to the institutions. That, at times made mention of competition, regulatory requirements, they announce their coming but with very short monitoring and supervision by regulators, licensed notice.
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Abstract This paper discusses most common fraud cases in Microfinance Institutions MFIs , how these frauds were perpetrated and suggest preventive pre and post measures. Relevant theoretical framework and similar study pertaining to frauds were reviewed.
A case study based approach is adopted discussing frauds and appropriate measures. The paper will largely benefit MFIs in addressing similar fraud issues by taking appropriate steps suggested in papers. The paper emphasizes on internal control, audit trail, client education, client visit and emphasis on integrating risk management and customer relationship management framework of the MFI. Introduction Microfinance Institutions MFIs serves the most underprivileged clients who are ignored by formal financial sector.
Nowadays most of the countries are adopting microfinance intervention as an important tool for serving the economically poor and underprivileged class and has been widely used in financial inclusion to provide tailored financial services to neglected areas.
Though these interventions have registered success stories both at client and entity level, yet frauds in MFIs have been a serious threat to their long-term sustainability and hence create hurdle and obstacles in achieving the objectives of servicing the poor and broadening of financial inclusion drive.
The effects of fraud can be devastating for both young and mature MFIs leading to closure and downscaling of their operations. Fraud is a willful act by person internal or external to the institution, usually motivated by self-gain. However, the critical element in identifying fraud is to determine whether it is intentional or erroneous.
Adeyemo, ; Adeniji, ; Akinyomi, Some of the factors identified among others responsible for fraud in the banking sector: a Weak corporate governance b Poor accounting practices, procedures and policies c Lack of client due diligence d Weak internal control system, policies and procedures e Perverted social values f Slow and circuitous judicial process; and g Fear of negative publicity Dhitima, ; Ogunleye, ; Iyiegbuniwe, Consequently the tradeoff between thus creating a cash difference Excess between the lower operations cost and adequate internal actual cash received and that recorded in the duplicate control mechanisms leaves the manager out in voucher.
The excess cash, fraudulently created is taken the field for marketing or loan collection whilst for personal gain. Conversion of Similarly as in point 1 discussed above, the manager The manager left alone jeopardizes the dual cash collected in goes out in the field in most cases alone for marketing control over the cash collected in the field.
Manager enters the illiterate who cannot decipher transaction correct amount in the original voucher given to the processes. Furthermore, the lack of client customers and intentionally understates the amount education allows client transaction written in the duplicate copy thus creating a cash manipulations.
These collection manager after their return to the MFIs only hand over the total cash as recorded in the duplicate voucher. Cash in vault The co-safe custodian in the MFIs negligently hands The dual control over the safe was compromised malpractice over the second key of the safe to the manager whilst due to the negligence of the co-safe custodian he traveled out of the MFIs community for some days. This gives the manger unrestricted access operations. He succeeds in covering up this fraud monitoring and disbursement process.
Though the credit with lack of pre-disbursement verification. Upon field verification with the customer the above was revealed. At one point to withdraw the money with a cheque instrument that was issued falsely to the said customer. In another event the colluded staff contracted the customer and involved him in the fraud by allowing him to withdraw the money from his account. This involves the entire customer and other staff involved.
Improper and The cashier who collects the daily deposits was asked The segregation of duties was found inadequate inadequate by the accountant to seal the cash collected in bundles and improper as the cashier who collected the segregation of by denominations and the cashier intentionally mixed deposit should not have checked and bundled duties the big notes with some smaller notes and then colored notes independently. This act went unnoticed and the cash was treasury in the vault.
This was unveiled when treasury was to pay out a customer. Conversion of The Customer Service Officer who was responsible to Breach of internal controls regarding the receipt deposits, share assist uneducated customers filling out their withdrawal of deposits.
This was done especially when the Management supervisory role of the banks daily bank is crowded and the customers got impatient to operations was lacking. The Customer Service Officer took advantage of the trust of the customers and she subsequently converted the cash to be deposited and withdraw on their behalf for her personal usage. She concealed her dubious act through falsifying slips for deposits, shares etc.
In the case of withdrawal she suppressed the cash by giving different version of excuses to the customers. This was only revealed when she fell ill and was absent for few days.
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