Regulation and Performance of Ghana’s Multi-tiered Rural and Microfinance Industry

The World Bank’s ‘Comparative Review of Microfinance Regulatory Framework Issues’ concludes that ‘recognizing different tiers of both regulated and unregulated institutions in a financial structure facilitates financial deepening and outreach’, yet warns that ‘legislation intended to promote microfinance may impose untenable supervisory burdens, while an excessively restrictive approach may constrict innovation and expansion’ (Gallardo et al., 2005, p. iii). Ghana represents a regulatory framework that has evolved to permit several tiers of both regulated and unregulated institutions engaged in microfinance, sometimes facilitating new institutional forms and sometimes responding to evolution of the market. Indeed, Ghana has been an innovator since the introduction of the first African credit union in 1955 and the first rural bank in 1976. It offers a contrast to countries that have only in the last decade created regulated tiers suitable for microfinance (for example, Uganda, Kenya), sometimes severely restricting their form (West African Monetary Union, Ethiopia), or that leave regulation to apex bodies (Bangladesh, Philippines; Meagher, 2002).