Challenges and prospects of Financial Institutions in Reaching Unbanked Communities

i
Table of Contents
LIST OF TABLES..........................................................................................................................ii
LIST OF ABBREVIATIONS.......................................................................................................iii
DEDICATION .............................................................................................................................. v
ACKNOWLEGEMENT..............................................................................................................vi
DECLARATION.........................................................................................................................vii
ABSTRACT ................................................................................................................................viii
GENERAL INTRODUCTION.................................................................................................... 1
1.0Background to the study .................................................................................................... 1
1.1Statement of the problem................................................................................................... 2
1.2Research questions.............................................................................................................. 3
1.3 Research objectives............................................................................................................. 4
1.3.1 The main objective .......................................................................................................... 4
1.3.2Specific objectives............................................................................................................. 4
1.6 Significance of the study ................................................................................................... 4
LITERATURE REVIEW............................................................................................................... 5
2.0 Introductions....................................................................................................................... 5
2.1 The history of formal banking in Ghana......................................................................... 5
2.2 The informal financial sector ............................................................................................ 6
2.3 The relationship between formal and informal financial institutions........................ 7
2.3The service of both formal and informal financial institutions to the people............ 8
RESEARCH METHODOLOGY ................................................................................................. 9
3.0 Introduction ........................................................................................................................ 9
3.1 Research design .................................................................................................................. 9
3.2 Population and Sample Size ............................................................................................. 9
3.3 Source of Data................................................................................................................... 10
3.4 Instrumentation................................................................................................................ 10
3.5 Questionnaires.................................................................................................................. 10

ii
3.6 Mode of Data Collection.................................................................................................. 10
3.7 Responds Rate of Administered the Questions........................................................... 11
3.8 Data Analysis and Presentation of Results................................................................... 11
3.9 Limitations of the Study.................................................................................................. 11
DATANALYSIS AND DISCUSSION OF FINDINGS .......................................................... 12
4.0 Introduction ...................................................................................................................... 12
4.1 Responses by the Respondents ...................................................................................... 12
4.2 Challenges of the financial institutions in reaching the unbanked........................... 14
4.3 Prospects of financial institutions in reaching the unbanked.................................... 15
SUMMARY, CONCLUSSION AND RECOMENDATIONS............................................... 16
5.0 Introduction ...................................................................................................................... 16
5.1 Discussion of findings ..................................................................................................... 16
5.2 Summary ........................................................................................................................... 17
5.3 Conclusion......................................................................................................................... 17
5.4 Recommendations............................................................................................................ 17
5.4.1Improving Susu scheme................................................................................................ 18
5.4.2Improving research and development........................................................................ 18
REFERENCES............................................................................................................................. 19
APPENDIX I: .............................................................................................................................. 21
APPENDIX II.............................................................................................................................. 23

iii
LIST OF TABLES
Table 1.0 Names and the Location of the Rural and
Community Banks in Wa…………………………………………...17
Table 1.2 Medium of Keeping Money by
Market Women in Wa……………………………………………...18
Table 1.3 Medium of Keeping Money by
Businessmen in Wa………………………………………................19

iv
LIST OF ABBREVIATIONS
NGO Non Governmental Organization
GDP Gross Domestic Product
GFSSP Ghana Financial Sector Strategic plan
ICLS International Conference of Labor Statisticians
MFIs Microfinance institutions
MDG Millennium Development Goal
FNGOs Financial Non Governmental Organizations
GHAMFIN Ghana Microfinance Institution Network
SPSS Statistical Package for the Social Science
ITU International Telecommunication Union
R&D Research and Development
ILO International Labor organization

v
DEDICATION
This research work is dedicated to Almighty Allah (God) for sustaining me in my quest for high
education. And to my dear brothers, Mr.MahamaAlhassan (Badal) and AlhassanFuseini
(Biyariga) for their love, care and support that has brought me far. I am grateful.

vi
ACKNOWLEGEMENT
I want to thank the Almighty Allah for his mercies and protection and love that he has, and
continues to bestow upon me. His blessing abound where he reigns and I am most grateful and
forever thankful that he has made it possible for me to complete this work.
I want to also express my profound gratitude to my Supervisor, Mr. KanlinsiKaba Simon for his
patient and guidance through this work. Special thanks also go to all the lecturers in the
department of Governance and Development Management for their effort that has brought me
far, may Almighty Allah richly bless you all. And to my family and friends, I say thank you!

vii
DECLARATION
I hereby declare that this work is the result of my original piece of research conducted in July,
2016 under the supervision of Mr.KanlinsiKaba Simon, University for Development Studies Wa
Campus, and that no part therefore of this project work has either been presented in whole or in
part to any other institution for any award.
In places where I have used the language, ideas, expressions, or writing of other people’s work,
full acknowledgements has been given. I therefore accept full responsibility for any mistakes
contained therein.
Student’s Signature Date
………………………………..………………………………...
(AlhassanFuseini Mustapha)
Supervisor’sSignature Date
……………………………….. ……………………………...
(Mr. KanlisiKaba Simon)

viii
ABSTRACT
The main financial institutions in the economy are the banks. They are the main mobilizers of
funds, providers of risk management services and financiers of medium- and large-scale
enterprises and government. It is through them that finance makes its major contribution to
sustained economic growth, development and stability in the country. The banking industry is
regulated by the Central Bank (i.e. the Bank of Ghana).This study was to find out the challenges
and prospects of financial institutions in reaching the unbanked communities in Wa. The study
was aimed at ascertaining the challenges and prospects that the financial institutions in Upper
West Region (Wa) faced in terms of extending their financial service to the entire population of
Wa and its environs.The study adopted the survey method and used interview to collect data
from a random sample of 20% of the people representing the unbanked communities in Upper
West Region (Wa). Questionnaires were also used to purposively collect data from 10 banking
personnel of selected financial institutions within the immediate environs of Wa. The study
revealed that the institutional and structural barriers, poor linkages between formal and informal
financial institutions like micro financing institutions which cover the large population and
among others are facts that make it difficult for financial service to reach the unbanked. The
study revealed that the „susu‟ scheme operated by the informal sector is very popular among the
market women. The study also revealed that, the introduction of Mobile Banking as well as the
micro finance system will contribute in no small measure to make financial service reach the
unbanked.Finally, the financial institutions are also prepared to do business with all kinds of
people. Recommendations on how to enhance financial service to reach the entire population of
Wa is to improve research and development. This will focus on identifying new opportunities
and applying new technologies to satisfy the needs of the people.

1
GENERAL INTRODUCTION
1.0Background to the study
Unbanked peopleare the people who are not serving by banks. These people do not use banks or
credit unions for their financial deposits or credits facilities. It is estimated that about half of the
world’s adult population are unbanked and do not have access to secure formal financial service.
However, access to basic banking services in Sub-Saharan Africa remains limited, and lags far
behind even other parts of the developing world. (Chaia et al. 2009) combine a number of data
sources to estimate that only about 20% of households in Sub-Saharan Africa were banked in the
early 2000s.While there has been some progress in recent years, Kendall et al. (2010) obtains
similar results using more recent data. While developing countries have only 28% as many bank
accounts per adult as do developed countries, the figure in Sub-Saharan Africa is far lower (only
16%). Lack of access is particularly acute in rural areas: representative household survey data
collected between 2009 and 2011 suggest that only between 15 and 21 percent of households are
banked in rural area of Kenya, Malawi and Uganda.
Financial institutions can be classified into formal and informal arrangement.
In Ghana, formal (banking) institutions include the Central Bank which is the Bank of Ghana,
Commercial banks, Development banks and Merchant banks etc, offering short to medium term
credits, Mortgage, Savings and Loan Institutions. The informal arrangement includes non-
governmental organizations (NGO), „susu‟, and cooperative societies as well as other
intermediary and relationship based credit institutions.
Unbanked communities which also have the right to enjoy financial service have been neglected
in the past by the formal financial institutions. This is due to institutional and structural barriers
such as high initial deposit requirements and the need for immobile collateral. This neglect by
the formal financial institution affect the level of production in the economy and the level of
national output-Gross Domestic Product (GDP) since a large number of the players are excluded
from the monetized economy. Though, unbanked communities have been neglected by the
formal financial institutions, but indeed, the concept of microfinance has come to salvage the

2
plight of the unbanked people. Available evidence suggested that the first credit union in Africa
was established in Northern Ghana in 1955 by Canadian Catholic missionaries. However, Susu,
which is one of the microfinance schemes in Ghana, is thought to have originated from Nigeria
and spread to Ghana in the early twentieth century (World Bank, 2003).
According to Ghana Statistical Service, the total population of Ghana is 24,658,823, (2010,
census report), and Upper West Region (Wa) have about 702, 110 persons constituting 2.8
percent of the total population. Majority of its people are into farming while others are engage in
trading. Almost all the local traders do not save their money in banks, and most of them hold to
the fact that (1) they do not trust the banks (2) the bank system is unreliable (3) withdrawal fees
is prohibitively expensive. Most of them being illiterates have problem of acquiring assistance
from the banking institutions. Illiteracy is a financial risk since interpretation and filing of forms
at the banks for loan processing may be done by another person. There has always been the
tradition of people saving and/or taking small loans from individuals and groups within the
context of self-help to start businesses or farming ventures (Asiama and Osei, 2003).
Micro financing is the provision of financial services to poor and low income households without
access to formal financial institutions (Conroy, 2003). Microfinance programmes provide loans,
savings and other financial services to low-income and poor people for use in small businesses
(Mhammed and Hasan, 2008).
1.1Statement of the problem
Financial institutions in Upper West Region (Wa), like other financial institutions in Ghana find
it difficult to extend their service to cover the entire population of Wa. In fact, there are some
people which do not have any relationship with the banks. And as a result did not get bank
assistance, since the purpose of banks are not only for saving but to also provide financial
assistance in the form of loan for easy capital to start business. The perceptions of some people
are that, there is high interest in change on the loan by the formal financial institutions, and
physical collateral required as well as mistrust when banks fail/officials absconds, and distance
to travel. Another problem is the financial policies and bank practices that make it hard for banks
to cover the high costs and risks involved in lending to small firms. Access to finance remained a
dominant constraint to small scale enterprises in Ghana.

3
Furthermore, there has not been a consistent approach in dealing with the constraints facing the
sub-sector. Such constraints include - inappropriate institutional arrangements, poor regulatory
framework, inadequate capacities, lack of coordination and collaboration, poor institutional
linkages, lack of linkages between formal and informal financial institutions, inadequate skills
and professionalism, and inadequate capital. In 1959, government of Ghana instituted loan
schemes for rural and agricultural ventures, as these areas were not being served well by
commercial banks such as the Barclays’ Bank, Standard Chartered Bank and Ghana Commercial
Bank, which focused on the urban areas at the expense of the rural areas. Rural people found the
size and bureaucracy of commercial banks, particularly the demand for written documentation, to
be unfriendly; they also had difficulty meeting the demand for collateral security. Thus, these
banks were regarded as structurally biased against the rural poor. The Bank of Ghana Act
(1964) established, among others, the Rural Banking Department. In order to address this state of
affairs the Agricultural Credit and Cooperative Bank was established in1965, and the
Agricultural Development Bank was established in 1967. The above discussion raises issues as
to how unbanked communities in Wa are administered by financial institutions. However, this
research work seeks to identify the challenges and prospects of financial institutions in Wa.
1.2Research questions
The study seeks to provide answers to the following under listed questions;
 What difficulties do financial institutions face in reaching the unbanked communities?
 What types of financial assistance do unbanked communities received from formal
financial institutions?
 What are the prospects of financial institutions in reaching the unbanked communities?
 What assertion do unbanked people hold towards the formal financial institutions?
 What type of financial assistance do unbanked people received from informal financial
institutions?
 How can financial institutions help in educating of people in the unbanked communities,
the needs and importance of having and maintaining a bank account?
 How financial institutions can encourages people in the unbanked communities opening
accounts with zero balance?
 What are the impacts of microfinance programme on the lives of the unbanked people?

4
1.3 Research objectives
The study seeks to achieve the objectives listed below;
1.3.1 The main objective
 To find out the challenges and prospects of financial institutions in reaching the unbanked
communities in Wa.
1.3.2Specific objectives
 To examine the type of financial assistance, the unbanked communities received from
formal financial institutions.
 To assess the impacts of microfinance progaramme on the lives of the unbanked people.
 To fine out the assertion hold by unbanked peopletowards formal financial institutions.
 To examine how the financial institutions can educate Ghanaian public about the needs
and importance of having and maintaining a bank account.
 To explain how financial institution can encourage people to opening account with zero
balance. This may not be profitable in short run but it may gain customer loyalty in long
run.
1.6 Significance of the study
Findings from the study would serve as a source of relevant information for academia by serving
as an additional source of library reference for students and lecturers. By this, further studies
could be replicated in different settings.
It would inform the formal financial institutions of the need of their operations and to widen their
coverage of service to the entire people in the Ghanaian economy.
It would help policy makers in planning effective strategies regarding financial institutions in
order to be friendlier to all kinds of people and to also address problems of specific sections of
the Ghanaian economy.
Again, it would help the financial institutions to improve upon their efficiency in contributing to
the growth of the operations of the people who are into business but do not use financial
institutions as their deposits and credits facilities. This is because business people constitute a
viable market segments in the economy of Ghana.

5
LITERATURE REVIEW
2.0 Introductions
This chapter presents a review of relevant literature under the following themes; the history of
formalfinancial institutions and informal financial institutions, the relationship between formal
and informal financial institutions as well as the service of both formal and informal financial
institutions to the entire people.
Banking in Ghana has been of significance in the growth of the economy. Small enterprises and
most of the poor populations in sub-Saharan Africa have very limited access to deposit and credit
facilities and other financial services provided by formal financial institutions. For example, in
Ghana and Tanzania, only about 5-6 percent of the populations have access to the banking sector
(Basu et al 2004). Banks are generally reluctant to give credit, especially to those starting a
business without proper collateral. The cost of handling micro-credit and the perceived risks
associated with them make such poor entrepreneurs ‘unbankable’ and thus of no interest to the
traditional banks (Council, 2002). These affect the level of production and economic growth
since large numbers of players are excluded from monetized economy. The main financial
institutions in the economy are the banks. They are the main mobilizers of funds, providers of
risk management services and financiers of medium- and large-scale enterprises and
government.It is through them that finance makes its major contribution to sustained economic
growth, development and stability in the country (Ghana financial sector strategic plan GFSSP
II, 2012).
2.1 The history of formal banking in Ghana
Formal banking began in Ghana (then Gold Coast Colony) in 1896 with a branch of the Bank of
British West Africa (Fry 1976) followed by Barclays Bank DCO in 1917 (Crossley and
Blandford, 1975). Both banks were operated and supervised by the branches of their London
head offices. The first indigenous bank was the Gold Coast Cooperative Bank, which was
established in 1945. Its main business was to support the marketing societies to buy cocoa from
the farmers. Its registration was cancelled in 1961 and its operations absorbed into the Ghana
Commercial Bank (Republic of Ghana 1970). In 1953, the Bank of Gold Coast was established
by statute as the first indigenous commercial bank with some central bank functions. In 1957 the

6
central banking functions and the commercial banking functions were separated between the
Bank of Ghana and the Ghana Commercial Bank respectively. (Steel and Andah, 2003). At the
time of independence, the Banking Industry in Ghana consisted of three (3) banks. The industry
has grown over the years. Since independence to 1983, there were 12 banks. The incorporation
of 11 banks into the banking sector over the last decade (1993-2003) does suggest the increasing
role that the banking sector is and would play in the nation’s economy. As at 31st/12/ 2007, there
were twenty three (23) banks, one hundred and twenty six (126) Rural and Community Banks
and forty one (41) Non-bank Financial Institutions, including fourteen (14) Savings and Loans
Companies (Bank of Ghana, 2007). According to the Ghana Banking Survey (2010) there are
currently 26 banks operating in the country, one hundred and thirty five (135) Rural community
banks, and Upper West Region(Wa) have about four(4) Rural and community banks. There are
about 15financial institutions (Banking and Non-banking) in the Municipality. However, due to
poor financial records keeping and lack of collateral it is not easy for Businesses to secure loans
from the banks. Venture and working capital is mostly sourced from personal savings
relatives/friends and money lender. This is one of the reasons why the enterprises cannot grow.
2.2 The informal financial sector
The International Conference of Labor Statisticians (ICLS, 1993) adopted an international
statistical definition of the informal sector so defined: namely, all unregistered (or
unincorporated) enterprises below a certain size, including micro-enterprises owned by informal
employers who hire one or more employees on a continuing basis; and own-account operations
20 owned by individuals who may employ contributing family workers and employees on an
occasional basis (ICLS, 1993). Although the concept of the informal sector has been debated
since its “discovery” in Africa in the early 1970s, it has continued to be used by many policy
makers, labor advocates, and researchers because the reality is that it seeks to capture – the large
share of the global workforce that remains outside the world of full-time, stable, and protected
jobs and continues to be important and has likely been increasing over time. At present, there is
renewed interest in informal work arrangements or informal labors markets. This current interest
stems from the fact that informal work arrangements have not only persisted and expanded but
have also emerged in new guises and unexpected places
This lack of access to financial services from the formal financial system is quite striking, when
one considers that in many African countries the poor represent the largest share of the

7
population and that the informal sector is an important part of the economy. To meet unsatisfied
demand for financial services, a large variety of microfinance institutions (MFI’s) has emerged
over time in Africa. Some of these institutions concentrate only on providing credit, others are
engaged in providing both deposit and credit facilities and some are involved only in deposit
collection (Basu et al, 2004).
According to the 2000 Population and Housing Census in Ghana, 80% of the working population
is found in the primary informal sector. This group is characterized by lack of access to credit,
which constrains the development and growth of that sector of the economy. Clearly, access to
financial services is imperative for the development of the informal sector and also helps to mop
up excess liquidity through savings that can be made available as investment capital for national
development (World Bank, 1999). The goal of attaining economic development in many more
countries around the world is unlikely to be realized while 1.7 billion working adults make less
than US$2 a day and have little or no access to basic financial services. According to Firpo,
(2005) the history of financial systems in the United States has shown that providing citizens
with capital and the ability to save are key underpinnings of economic growth. Yet between70%
and 80% of the world’s population has no access to even the most basic financial services.
Littlefield and Rosenberg (2004) argue that the poor are generally excluded from the economy,
so micro finance institutions (like the rural bank) have emerged to address this market failure.
Microcredit is a key strategy in reaching the MDGs and in building global financial system that
meets the needs of the poorest people (Simanowitz and Brody, 2004).
2.3 The relationship between formal and informal financial institutions
The relationships between formal and informal financial institutions are not that cordial.
However, The dualist school of thought, popularized by the ILO in the 1970s, subscribes to the
notion that the informal sector is comprised of marginal activities – distinct from and not related
to the formal sector – that provide income for the poor and a safety net in times of crisis (ILO,
1972; Sethuraman, 1976; Tokman, 1978). The structuralist school, popularized by Moser and
Portes (among others) in the late 1970s and 1980s, subscribes to the notion that the informal
sector should be seen as subordinated economic units (micro-firms) and workers that serve to
reduce input and labor costs and, thereby, increase the competitiveness of large capitalist firms.
Whiles formal financial institution offering short to medium term credits, Mortgage, among

8
others, the formal financial institutions also lend money, do payments, do saving among othersto
the people. They are also saving collectors whose job entails taking regular deposits (often daily
or weekly) of an amount determined by each client and return the accumulated sum at the end of
a stipulated period (usually a month), minus a day’s deposit as commission. But the current re-
thinking of the informal economy suggests the need for an integrated approach that looks at
which elements of dualist, and structuralist, theories in an economy.
2.3The service of both formal and informal financial institutions to the people
According to the section 47 of the Banking Act 1970, defines such terms as „bank‟, „banking
enterprise‟ and the „business of banking‟. According to the said section 47, “banking means any
banking enterprise (whether foreign or Ghanaian) which is issued with a license”. “Banking
enterprise means any enterprise not yet issued with license which carries on or proposes to carry
the business of banking”. The business of banking means: The acceptance of lending or
investment purposes of deposits of money from the public repayable on demand and
withdrawable by cheques, drafts, orders or by other means.
The financing, whether in whole or in part or by way of short, medium, or long term loans or
advances, of trade, industry, commerce or agriculture.
It must therefore be noted that, no person shall carry on the business of banking without a valid
license according to the Banking Act 1970, Act 339 section 2. Also under section 1(i) of the Act,
it is provided that only “a body corporate incorporated in Ghana” shall carry on the business of
banking (Addeah, 1989).
As in all countries, financial sector development in Ghana is important for economic
development and poverty reduction. Financial institutions in the country are the mobilizers of
funds, providers of risk management services and financiers of individuals, enterprises and
government. It is in these ways that finance makes its contribution to economic growth,
development and poverty reduction. While all financial institutions play their respective roles in
economic growth, development and poverty reduction, they do so to varying degrees, with the
mainstream financial institutions being the main players. Micro-finance institutions include
savings and loans companies, credit unions, individual SusuCollectors and SusuCompanies.
Other micro-finance institutions operating in the country include FinancialNon Governmental
Organizations (FNGOs), micro-insurance companies and micro-leasing companies.

9
Microfinance units also exist in many of the main stream banks. Micro-finance institutions focus
on the poor in rural and urban areas and spearhead poverty reduction efforts. The umbrella
organization for many of the microfinance institutions in Ghana is the Ghana Microfinance
Institutions Network (GHAMFIN), a network of about 80 microfinance institutions serving over
60,000 clients as at the end of 2010.
RESEARCH METHODOLOGY
3.0 Introduction
This chapter comprises the techniques and procedures employed in carrying out the study. A
detailed procedures and analysis as to the collection of data required for the study are well
explained in this chapter. These techniques are organized and presented as a sequence of steps
and techniques to achieve the objectives proposed in the study. It contains the research design,
sampling method, the research instruments, data collection procedure, method of data analysis,
presentation of results, problems encountered and limitations.
3.1 Research design
A research design is a framework for conducting a research. It details the procedures necessary
for obtaining information needed to solve a research problem (Malhotra and Birks, 2007). The
survey method was adopted for this study. This is because the survey method would allow one to
collect quantitative data which can be analyzed quantitatively using descriptive and inferential
statistics (Saunders, et al, 2007). It was also used because it reduces cost and time associated
with census. Considering the large number of the people, who are unbanked? The survey method
is preferred. A cross-sectional survey method was used to collect information from the sample,
thus all relevant data were collected at a point in time but within some specify period.
3.2 Population and Sample Size
Jankowicz (1995) points out that in order to draw a sample; one has to know how many people
are in the population and how this total is made up from people falling into various 39 subgroups
in which you might be interested. The population for the study consisted of all the financial
institutions in Wa. But for the purpose of cutting down cost and limited time available, the
researcher concentrated on all registered financial institutions in Wa Municipality, which are

10
about 15 financial institutions (Baking and Non Baking). 10 banks were randomly selected to
respond to the questionnaires, and 20% of the unbanked people were also selected for an
interviewed.
3.3 Source of Data
Both primary and secondary data were gathered for the study. According to Malhotra and Birks
(2007), the researcher should locate and analyze secondary data before collecting primary data.
They indicated that secondary data which are data that have already been collected for the
purpose other than the problem at hand can help in sample designs and in the details of primary
research methods. For this reason, the researcher first reviewed existing literature made up of
textbooks and other materials found useful from other sources such as the internet. Primary data
is data that will originate by the researcher specifically to address the research at hand. The
Primary data for the study were generated from the questionnaires.
3.4 Instrumentation
The quality of research depends to a large extent on the quality of the data collection tool.
Interviewing and administering questionnaires are probably the most commonly used research
techniques. Therefore designing a good “questioning tools” form an important and time-
consuming phase in the development of most research proposals.
3.5 Questionnaires
Designing a good questionnaire always takes several drafts. In the first draft the researcher
concentrated on the content. Secondly, the researcher looked critically at the formulation and
sequencing of the questions. Then scrutinize the format of the questionnaire.
3.6 Mode of Data Collection
The researcher use simple random sampling; This type of sampling is also known as chance
sampling orprobability sampling where each and every item in the population has an equal
chance ofinclusion in the sample and each one of the possible samples, in case of finite universe,
hasthe same probability of being selected. This was use purposelyfor selecting the financial
institutions which are to respond to the questionnaires. Systematic samplingwas also used for
selecting the people who are unbanked. C.R Kothari maintains that the most practical way of
sampling is to select every 15th name on a list, every 10th house on one side of a street and so
on. Sampling of this type is known as systematic sampling. After the selection of both financial

11
institutions and unbanked people the questionnaires were drafted and administered personally by
the researcher. The questionnaires were personally given out to the respondents. The
researcher personally collected all completed questionnaires from the respondents at
the point where the questionnaires were administered to them. Instances where the 6
respondents (banks) were not able to fill the questionnaires at the first time of
administering it, another day was rescheduled for it collection. By so doing, the
researcher went through each questionnaire after it has been filled out to ensure that the
respondent has answered all relevant questions.
3.7 Responds Rate of Administered the Questions
The total number of questionnaire administered was 10. The entire questionnaire were completed
and returned. Barbbi (1991) posits that a response rate of at least 50% is adequate for analysis
and reporting. A response rate of 60% is good, whilst a response rate of 70% is very good.
Fortunately, a very good response rate of 100% was achieved. The high response rate was
achieved because of the personal contact, between the researcher and the respondents during the
distribution of the questionnaire.
3.8 Data Analysis and Presentation of Results
The primary data that were collected from the survey using the questionnaires were analyzed
using the Statistical Package for the Social Science (SPSS). According to Healey (1993), SPSS
was used because it is easily used to define variables, and assigned codes to respondents, enter
data and generate outputs (tables and graphs). Even though an interview was conducted, the
questionnaire was the main mode of data collection. Therefore the data collected was also
analyzed using SPSS. The data from the interview were summarized qualitatively and
interspersed with the results obtained with the questionnaires.
3.9 Limitations of the Study
The limitation of the study was the inability to use a large sample size. This was not being
possible because of time limitation. The busy work of my respondents from the banks also
constituted another challenge, the time schedule for responding to questioners were keep on
changing. Another challenge encountered were the fact that the unbanked people were not all
that friendly to talk.

12
DATANALYSIS AND DISCUSSION OF FINDINGS
4.0 Introduction
This chapter deals with the data analysis and discussion of the findings. This chapter has been
organized under four (4) themes namely: challenges of the financial institutions in reaching the
unbanked communities, the prospects of financial institutions in reaching the unbanked
communities as well as the service unbanked people received from both formal and informal
financial institutions in Wa.
4.1 Responses by the Respondents
The respondents were ten (10) in total. Out of the 10 respondents, 6 were formal financial
institutions, four (4) were rural and community banks. Five (5) unbanked community were also
selected for interview. These banks were selected because there were the registered banks which
have lances.
Table 1.0 Locations of rural and community banks
Number Banks Location
Nandom Rural Bank Nandom
2
Sonzele Rural Bank Jirapa
3
Sissala Rural Bank Tumu
4 Lawra Area Rural Bank Lawra
However, theformal financial banks that were selected by the researcher include; Ghana
Commercial Bank, National Investment Bank, Agric Development Bank, Barclays Bank, Stanbic
Bank and Multy-Credit Bank Limited. All these banks are located within Wa Township.

13
On the part of unbanked people, out of 20%, female representation was 10% and all of them
were traders. And the remaining 10% were males which were also businessmen. However, some
of these women are high earners which earn between GHC10.00 to GHC50.00 and GHC60.00 to
GHC100.00 a day, and the remaining are the average earners.
When the market women were asked how they keep their money, the results in Table below were
obtained. It can be observed that 2 (20.0%) of the market women representing those who said yes
to keeping their money in Banks, 3 (30.0%) prefer saving within themselves whilst 5(50.0%)
prefer Keeping their funds with Susu personnel in the informal financial institutions. Generally,
majority prefer saving with Susu personnel.
Table 1.1Medium of Keeping Money by Market Women in Wa
Medium of Keeping
money
Frequency Percentage
Bank 2 20.0%
Within themselves 3 30.0%
Susu 5 50.0%
Total 10 100.0%
Source: Author’s Field Survey, 2016
On the same way, ten (10) businessmen were asked as to how they keep their money and the
results in the table were obtained.
Table 1.2Medium of Keeping Money by the Businessmen in Wa
Medium of Keeping
money
Frequency Percentage
Bank 6 40.0%
Within themselves 3 30.0%
Susu 1 10.0%
Total 10 100.0%
Source: Authors Field Survey, 2016

14
It can be observed that 6 (60.0%) of the businessmen prefer saving with the Banks operated by
formal financial sector, 3 (30.0%) said they prefer saving part of their funds with themselves and
1 (10.0%) said they prefer saving their money with Susu which is operated by the personnel in
the informal sector. Generally, the businessmen prefer personal savings then banks.
4.2 Challenges of the financial institutions in reaching the unbanked
On the part of the people who are unbanked, the study has shown that there are institutional and
structural barriers such as high initial deposit requirements and the need for immobile collateral.
The unbanked people also holed to the facts that they do not trust the banks and the bank systems
are unreliable, withdrawal fees is prohibitively expensive. Also, most of them being illiterates
have problems of acquiring assistance from the banks, since the interpretation and filing of the
forms has to be done by someone. They also have the difficulty in meeting the demand for
collateral security, and therefore regarded the banks as structural biased against the rural poor.
On the part of the financial institutions in Wa, financial policies and bank practice that make it
difficult for banks to cover the high cost and risks involve in lending the people has being of the
challenge to them. Here, some of them being illiterates and do not even have any serious
business that can enable them have bank assistance make them to be unbanked. Again,
inappropriate institutional arrangement, poor regulatory framework, inadequate capacities, lack
of co-ordination and collaboration, poor institutional linkages, as well as lack of linkages
between formal and informal financial institutions are all of challenges to them. Here, the
institutional arrangement such as situating the banks in urban areas make some of the unbanked
people felled that the banks are only for urban people, and also felled of the distance from their
community to the banks. Also, there is no link between the formal financial institutions which
cover less of the population, and the informal financial institutions that cover much of the
population. However, (Aryeetey 2008) revealed that, formal financial institutions are mostly
accessible to populations in the upper and middle income strata and very often less accessible to
the urban low income populations. Aryeetey (2008) still maintains that, informal financial
institutions (to which Savings and Loan companies belong) operate close to rural populations
and have information on their clients which enables them to conduct their operations
productively. He further argues that the informal financial institutions have much better
information about small borrowers than formal institutions.

15
4.3 Prospects of financial institutions in reaching the unbanked
The introduction of the mobile baking is one of the important measures adopted by the financial
institutions to help minimize the problem.
According to Petrova K. (2002) “M-banking can be defined as the ability to conduct bank
transactions via a mobile device, or more broadly to conduct financial transactions via a mobile
terminal’’. Or Mobile Banking refers to provision of banking and financial services with the help
of mobile telecommunication devices. Use of mobile phone for inclusive finance is very crucial
for countries where most of the population is unbanked or under banked.
Here, mobile baking served as an intersection between mobile telephony and digital currency
(electronic payment systems).Studies has shown that mobile telephony leads to a rise in GDP.
M-banking is an invaluable and powerful tool driving development, supporting growth,
promoting innovation, and enhancing competitiveness (Nath, R. et al 2011) early, digital
currency (electronic payments), as a replacement for cash, is recognized to have the same effect.
A number of studies done concluded that a 10% rise in mobile subscribers in emerging markets
will lead to a 0.6%to 1.2% increase in GDP in those markets due to the productivity gains
associated with communication as well as new jobs (International Telecommunications Union
‘ITU’ 4th
/ 06/2010).
According to some of the financial institutions, the introduction of mobile baking will helps in no
small measure to build consumer awareness and confidence, using mobile baking as an informal
channel. These financial service offerings tailored to low income clients. There are also,
significant low transaction fees. Therefore, Mobile Banking eliminates the time as well as space
shortcomings from banking operations like, balance inquire and fund transfer from one account
to another account without visiting bank branches (Mishra and Sahoo, 2013). It enhances
efficiency, offers access to financial and banking services, generates new opportunities for
income generation and improves governance and gives poor people a voice.
The introduction of micro financing is another way by which finance service can reach the
people. It comprised savings and loans companies, credit unions, individual SusuCollectors and
SusuCompanies as well as Financial Non-Governmental Organizations (FNGOs), micro-
insurance companies and micro-leasing companies. Micro finance units also exist in many of the
main stream banks. Micro-finance institutions focus on the poor in rural and urban areas and
spearhead poverty reduction efforts.

16
SUMMARY, CONCLUSSION AND RECOMENDATIONS
5.0 Introduction
In this chapter the discussion of the findings, conclusions drawn from the findings, as well as the
implementations of the study and recommendations for further studies have been presented
5.1 Discussion of findings
The data shows that unbanked people are less served by the financial institutions. Aryeetey and
Gockel (1991) examine some of the factors that influence demand for formal savings and lending
facilities in Ghana and observe that incomes, bank formalities and banks‟ preference for large
transactions were the major ones.
Again, the study shows that unbanked people also have difficulty in meeting the collateral for
loans. In an earlier study, Christen et al (1995); ILO, (1996) observed that most micro finance
institutions were able to increase patronage by overcoming inability of unbanked people to
provide traditional collateral, such as property, equipment or capital. Instead, they use „collateral
substitutes‟ such as peer pressure (joint liability in arrangements to lending to „solidarity‟
groups) and probation (credit scoring).
Finally, the study revealed that the banks fail to serve all the entire population because of
inappropriate institutional arrangement, poor regulatory framework, inadequate capacities, lack
of co-ordination and collaboration, poor institutional linkages, as well as lack of linkages
between formal and informal financial institutions. This agrees with Ogunrinola et al, 2005;
Oluwalana and Adegbite, 2005, who said the formal banks are not popular in disseminating loans
to women micro entrepreneurs. On the prospects, the study has shown that the introduction of M-
banking will go in a long way to help minimize the situation. Example, with Fidelity Bank you
can now assess your banked accounts on mobile phone.Another important factor of both formal
and informal markets relates to penalties. In the absence of formal contract enforcement
mechanisms, both formal and informal institutions rely on lending practices that emphasize loan
screening rather than monitoring, which appears to suggest more concern with adverse selection
than moral hazard (Aryeetey and Gockel, 1991).

17
5.2 Summary
The main purpose of the study was to find out the challenges and prospects of financial
institutions in reaching the unbanked communities in Wa. There were questions as to the issues
that make it difficult for banks service to reach the unbanked people as well as issues that can
make it possible for bank service to reach unbanked people. Inappropriate institutional
arrangement, poor structural barriers, lack of linkages between formal and informal financial
institutions among others make it difficult for bank service to reach the unbanked people.
However, the introduction of mobile banking is an important measure to help curb the problem.
Introduction of micro financing is another way for financial service to reach the unbanked.
In the process of conducting the study, the survey method was adopted. For this purpose the
questionnaire instrument for gathering data was used. The administration of the questionnaire
was done by the researcher himself with the assistance of some banking personnel.
The researcher used SPSS to analyze the results. Frequencies and percentages were used as
statistical tools to present the results of the study.
5.3 Conclusion
Based on the major findings of this study, the following conclusions could be drawn. For
financial institutions to reach the unbanked communities, the banks should be properly structured
to ensure that it is easily assessable to both banked and unbanked people. They should be a link
between formal and informal financial institutions. And for unbanked people to be able to access
funds they should have permanent place of transacting business, savings account and save
regularly which can serve as cash collateral to access funds. They also must show credit
worthiness. Theunbanked people perceived the formal financial institutions positively. The
„susu‟ scheme operated by the informal sector is very popular among the market and that the
market women prefer saving with the informal „susu‟ scheme to the formal „susu‟ scheme by
the financial institutions, though most of them are aware of the „susu‟ scheme operated by the
formal financial institutions. The formal financial institutions are prepared to do business with
the unbanked people to enhance their economic activities.
5.4 Recommendations
The following recommendations are made for consideration by the financial institutions

18
5.4.1Improving Susu scheme
After exhaustively carrying out this research and coming out with the findings that have been
elaborated in the above chapter, the researcher has come to the valid conclusion that there is
more room to improvement in the formal „susu‟ scheme by the financial institutions.
5.4.2Improving research and development
With respect to marketing strategies, it is recommended that the financial institutions should
adopt research and development (R&D) as the major marketing tool. This will focus on
identifying new opportunities and applying new technologies to satisfy all the people in general.
In this way, the prospects of reaching the unbanked communities by financial institutions will be
greatly achieved.

19
REFERENCES
Addeah, K (1989). An Introduction to the Law of Rural Banking in Ghana.
AmantahPublications, Accra.
Aryeetey, E. and Gockel, A. F., (1991). “Mobilizing Domestic Resources for Capital Formation
in Ghana. The Role of the Informal Financial Sector, ‟‟ African Economic Research Consortium
Research Paper No. 3, 1991, Nairobi.
Aryeetey, E., 2008, From Informal Finance to formal Finance in Sub-Saharan Africa: Lessons
from Linkage Efforts, IMF Institute and the Joint Africa Institute (Paper presented at High-Level
Seminar on African Finance for the 21
st
Century).
Babbie, E. R., (1991). The Practice of Social Research. Belmont, C A: Wadsworth
Christen, et al., (1995). Maximizing the Outreach of Micro Enterprises Finance. An analysis of
Successful micro finance programs, USAID, Washington
Conroy, D. J. (2003). The Challenges of Micro financing In Southeast Asia. Institute of
Southeast Asian Studies: SingaporeConference on Informal Financial Sector and Sustainable
Development in Nigeria at University of Ado – Ekiti.
Council, H, S, R., (2002), Micro-Finance in Rural Communities in Southern Africa: Country and
Pilot Case Studies, Policy Issues and Recommendations, HSRC.
Crossley, J., Blandford J., (1975) the DCO Story, Barclays Bank International Ltd., London.
Fry, R., (1976) Bankers in West Africa, London, Hutchison, Benham
Financial Institutions (Non-Banking, 1993) Law, PNDC 328
GHAMFIN (n.d), Microfinance Poverty Outreach and Performance Assessment: A Study of
Rural Microfinance Institutions com).
ILO, (1972). Employment, Incomes and Equality: A Strategy for Increasing Productive
Employment in Kenya. Geneva: ILO

20
ILO, (1996). Collateral Law and Collateral Substitutes, A paper for the Donor’s working group
on Financial Sector Development, Social Finance Unit, and Geneva
Malhotra, N. K. and Birks, D. F., (2007). Marketing Research: Applied Approach 3rd-London:
Prentice Hall
Mhammed, A. D. and Hasan, Z. (2008). Microfinance in Nigeria and the prospects of
introducing its Islamic version there in the light of selected Muslim countries‟ experience.
MPRA Paper No. 8127. http://mpra.ub.uni-muenchen.de/8127/ (retrieved on 21/02/2011 at
12:45pm).
Ogunrinola et al., (2005). Informal Savings and Economic Status or Rural Women in Nigeria. A
paper Presented at the National Conference on Informal Financial Sector and Sustainable
Development in Nigeria at University of Ado-Ekiti from 8th – 10th June
.Oluwalana E.O and Adegbite, D. A., (2005). Effect of Informal Credit on Agricultural
Productivity on Women Cooperatives in Ogun State. A paper presented at the National
Saunders, M., Lewis P., and Thornhill, A., (2007); Research Methods for Business Students/ 4th
Edition. – London: Prentice Hall.0
Sethuraman, S.V. (1976). The Urban Informal Sector: Concept, Measurement and Policy.
International Labor Review 114(1): 69-81.
Simanowitz, A. and Brody, A. (2004). Realizing the potential of microfinance. ID 21 Insights,
December, Issue – 51
Tokman, Victor (1978). "An Exploration into the Nature of the Informal-Formal Sector
Relationship". World Development, 6 (9/10): 1065-1075
World Bank Research Observer, vol. 9, no. 1: 27–47.
World Bank, Rural and Micro Finance Regulation in Ghana: Implications for Development of
the Industry, World Bank, New York (2003).

21
APPENDIX I: QUESTIONNAIRE
UNIVERSITY FOR DEVELOPMENT STUDIES
FACULTY OF PLANNING AND LAND MANAGEMENT
DEPARTMENT OF GOVERNANCE AND DEVELOPMENT MANAGEMENT
QUESTIONNIARS FOR THE UNBANKED PEOPLE
Dear Respondents,
I am a student of University for Development Studies undertaking a study on “Challenges and
Prospects of Financial Institutions in Reaching the Unbanked Communities in Wa”,for a partial
fulfillment of an award of Diploma in Development Management. I would be grateful if you
could assist me achieve this aim by answering this questionnaire. You are assured of high
confidentiality.
Thank you.
…………………
Alhassan F. Mustapha
INSTRUCTION:Please provide answers where required or tick the answer that best fits the
question.
A. Background of Respondents
1. How old are you? (i) 19 – 29 [ ] (ii) 30 – 39 [ ] (iii) 40 – 49 [ ] (iv) 50 – 59 [ ] (v) 60 + [ ]
2. Gender: (i) Male (ii) female
3. What is your occupation? Student ( ) Public Servant ( ) Petty Trader ( ) Artisan ( ) Other
(please specify)
4. Type of trade: (please specify) ……………….
5. How long have you been in the business?
B. Saving’s behavior
6. Do you currently maintain an account with any other financial institution?
Yes ( ) No ( )
7. What type of financial institution? Bank ( ) Savings and Loan Company ( )

22
8.What is your reason for your answer to above?
……………………………………………………………………………………………………..
9. If you do not save with them why?
…………………………………………………………………………………………………..
10. What is your perception towards the financial institutions, here in Wa?
……………………………………………………………………………………………………
11. Have you ever receive any financial assistance from any of the financial institutions?
Yes ( ) No ( ).
12. If yes, what type of financial service? (i) Loan (ii) deposits (iii) others,
specify…………
THANK YOU
Email:mustaphaf183@gmail.com, TEL:0241951395

23
APPENDIX II: QUESTIONNAIRE
UNIVERSITY FOR DEVELOPMENT STUDIES
FACULTY OF PLANNING AND LAND MANAGEMENT
DEPARTMENT OF GOVERNANCE AND DEVELOPMENT MANAGEMENT
.QUESTIONNIARS FOR BANKS OFFICIALS
Dear Respondents,
I am a student of University for Development Studies undertaking a study on “Challenges and
Prospects of Financial Institutions in Reaching the Unbanked Communities in Wa”,for a partial
fulfillment of an award of Diploma in Development Management. I would be grateful if you
could assist me achieve this aim by answering this questionnaire. You are assured of high
confidentiality.
Thank you.
…………………
Alhassan F. Mustapha
INSTRUCTION:Please provide answers where required or tick the answer that best fits the
question.
A. General Information of Financial Institutions
1. Name of Bank: ……………………………………………………………………………
2. Location of Bank…………………………………………………………………………
3. Who are your clientele?
(i) Public Servants ( )
(ii) Small & Medium scale enterprises and Traders ( )
(iii)Corporate Organizations ( )
(IV). others (specify)
4. 11. How many small scale enterprises are you able to support each year with respect to the
number that apply?

24
…………………………………………………………………………………………………..
5. What are the reasons that prevent the bank from serving all small scale enterprises that apply?
…………………………………………………………………………………………………..
6. What problems does the bank face in credit delivery to small scale industries?
………………………………………………………………………………………………….
7.What suggestions will you recommend to address these problems?
…………………………………………………………………………………………………..
8. What type of service your bank offer to the general public?
…………………………………………………………………………………………………
9. In your own opinion, does public appreciate your service? Yes ( ) No ( )
10. If no, what are the challenges that prevent complete service enrichment?
……………………………………………………………………………………………….
10. What are the bank strategies needing improvement in other to enhance complete service
enrichment?
11. What are the prospects of the institution to cover the unbanked?
………………………………………………………………………………………….
THANK YOU!
Email:mustaphaf183@gmail.com, TEL:0241951395

Challenges and prospects of Financial Institutions in Reaching Unbanked Communities

Recommended

Recommended

More Related Content

Similar to Challenges and prospects of Financial Institutions in Reaching Unbanked Communities

Similar to Challenges and prospects of Financial Institutions in Reaching Unbanked Communities (20)

Recently uploaded

Recently uploaded (20)

Challenges and prospects of Financial Institutions in Reaching Unbanked Communities