Reducing Loan Default Rate Among Microfinance Institutions (MFIs) in Ghana Through Innovative Product Design, Delivery and Efficient Loan Management

Micro, Small and Medium Enterprises (MSMEs) have been identified as the catalyst for the economic growth of a country. They are a major source of income and employment and consequently poverty reduction. Small and Medium Enterprises (SMEs) contributed 49% of Ghana's GDP in 2012 which impact significantly on economic growth, income and employment. Traditionally, financial institutions have been cautious with lending to MSMEs due to the high default rates and risks associated with such ventures. Microfinance institutions, however, seemed to have the means to make financial services available to relatively poor households and microenterprises in transactions suited to their conditions. In spite of this, high default rates in MSMEs lending is a major concern to policy makers in developing countries, because of its unintended negative impacts on MSMEs financing. This paper therefore proposes a conceptual framework that reduces loan defaults in MSMEs lending among MFIs in Ghana via Innovative loan product design, delivery and efficient management. This paper concludes that, for MFIs to be sustainable and profitable, it is imperative on them to be innovative in their products design and services. It is recommended that MFIs commit resources to their human resource capacity building and market research to stay competitive