Financial Characteristics and Innovations in Microfinance Institutions in Ghana

Haruna Issahaku^1, , Stanley Kojo Dary¹ and Yazidu Ustarz¹

¹Department of Economics and Entrepreneurship Development, Faculty of Integrated Development Studies, University for Development Studies, Tamale, Ghana.

Cite this paper:
Haruna Issahaku, Stanley Kojo Dary and Yazidu Ustarz. Financial Characteristics and Innovations in Microfinance Institutions in Ghana. American Journal of Rural Development. 2013; 1(3):40-48. doi: 10.12691/ajrd-1-3-2

Abstract

The relationship between the financial structure of Microfinance Institutions (MFIs) and their innovativeness remains unexplored in the microfinance literature. This paper represents an attempt to fill this void using a random sample of microfinance institutions in the three northern regions of Ghana -Northern, Upper East and Upper West regions. The impact of financial characteristics on innovation was ascertained using a combination of Analysis of Variance (ANOVA) multiple regression, and binary logistic regression. The findings revealed that the loan repayment rate, and interest rate affect the introduction of new savings products (product innovation), and number of branches (location innovation). Sources of funding involving banking funding, and equity of owner were found to encourage the development of new loan products. The findings call for the need for MFIs to diversify their funding sources as a means of enhancing innovativeness and mitigating risk.

Keywords:
analysis of variance multiple regression binary logistic regression northern Ghana financial characteristics innovation microfinance institutions

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