Due Diligence in Finance Key to Mitigating Poverty and Unemployment in Ghana
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As Ghana continues to grapple with poverty and unemployment, experts are urging financial institutions to adopt due diligence in their operations to achieve their mission of reducing these social ills.
Challenges Facing Microfinance Institutions
According to a study by David Kwasi Mensah and V. Rengarajan, the microfinance system in Ghana is facing numerous challenges that hinder its ability to effectively provide financial services to the poor. These challenges include:
- Insufficient donor funds
- Lack of proper adherence to rules and regulations
- Improper monitoring systems
- Loan delinquency
- Continued dependence on traditional money lenders
The Need for Due Diligence
The study found that microfinance institutions (MFIs) often fail to cater to the needs of their clients, resulting in poor client protection and capability differential among the poor. To overcome these hurdles, the authors suggest:
- Arranging adequate investable funds through institutional linkages
- Identifying target groups based on their capabilities
- Designing integrated pro-poor financial products and services
- Building the capacity of the poor through financial literacy and skill upgradation
- Providing client protection until they graduate above the poverty line
The Importance of Due Diligence
In an interview, David Kwasi Mensah emphasized the importance of adopting due diligence in finance to address poverty and unemployment in Ghana. “Microfinance institutions must take a holistic approach to providing financial services to the poor,” he said. “This includes designing products that cater to their needs, building their capacity through financial literacy, and providing client protection until they graduate above the poverty line.”
The Role of Digitization
The study’s findings are timely, given the recent emphasis on digitization in Ghana’s microfinance sector. As more MFIs adopt digital platforms to provide financial services, it is crucial that they prioritize due diligence to ensure that these services benefit the poor and vulnerable.
Conclusion
Adopting due diligence in finance is critical to mitigating poverty and unemployment in Ghana. It requires a concerted effort by MFIs, policymakers, and other stakeholders to design and deliver financial products and services that cater to the needs of the poor. By prioritizing due diligence, financial institutions can play a vital role in reducing poverty and unemployment in Ghana.