THE EFFECT OF NON-PERFORMING LOANS ON THE PROFITABILITY OF MICROFINANCE INSTITUTIONS IN GHANA :1Rowland Seyram Koku Dabi 2Nugraha 3Disman 4Maya Sari
1Faculty of Finance and Economics Education, School of Management Studies, Universitas Pendidikan Indonesia (UPI)
2Faculty of Management, Financial Management, Universitas Pendidikan Indonesia (UPI)
3Professor of Management Science, Public finance, Economics and Finance Banking. Universitas Pendidikan Indonesia (UPI)
4Department of Economics education and Corporative, Universitas Pendidikan Indonesia (UPI)
Abstract
The present study determined the impact of non-performing loans on the profitability of microfinance institutions in Ghana using Advans Ghana Savings and Loan Company Limited as a case study. The study utilized primary data from fieldwork in 2017 and secondary data sourced from the Bank of Ghana. Purposive sampling was used to select thirty respondents that included all loan officers (client relationship officers), deputy and the branch manager for the study. Primary data was collected by way of structured and semi-structured questionnaires with closed-ended questions. Findings revealed that within the study period (2011-2015), the institution recorded a sizeable proportion of Non-Performing Loans (NPLs) in its total loan stock. The general trend of the incidence of NPLs improved significantly from 8.41% in 2011 to 3.26% in 2012 which increased by 1.16% between 2012 and 2013, and remained on a reducing trend from 2013-2015. Further findings suggested that the improvement in the quality of the loan portfolio was due to management decision in 2013 to slow down on granting of loans and rather focused attention and direct energy towards the recovery of the existing, due (default within 7days) and overdue (default within 90days) loans. The study concluded that Non-Performing Loans adversely affected Advans Ghana Savings and Loans Company Limited^s financial performance in terms of profitability and liquidity within the period under consideration. The study recommended sound and prudent measures from the bank to forestall the total collapse of the MFIs under the huge NPL portfolios^ weight in their books.
Keywords: Microfinance, Profitability, Non -Performing loans, Loans
