Question

Question One
a) Distinguish between individual lending contracts and group lending contracts.
b) Discuss how group lending mitigates adverse selection and moral hazard problems.

c) Explain four limitations of group lending.
d) “Formal service providers in the financial sector focus more on men than women.”
Justify the view that microfinance institutions should focus on women.

Question Two
The Bank of Ghana has scheduled a forum to discuss the current state of microfinance
institutions (MFIs) in the country. You are expected to submit a paper at the forum focusing on
two broad areas, namely financial needs of the poor in the Ghanaian society and risk
management practices of MFIs.
a) Explain four (4) factors that affect financial services needs of the poor in Ghana.

b) Discuss five (5) types of risk that MFIs face in their operations.


Question Three
a)
i. Describe the term “financial inclusion”.
ii. Explain the four (4) dimensions you would employ to measure financial inclusion.

b) Discuss the role of government in promoting financial inclusion in Ghana.

Question Four
a) Explain the role of subsidies in the sustainability of microfinance institutions (MFIs) in
Ghana.

b) Discuss the benefits of deposit mobilisation as a source of funding for microfinance
institutions (MFIs).

Answer 1

Question one -

A) Group lending contracts are contracts in the the lenders disburse capital to a group which has limited liabilities towards the loan whereas in Individual contracts the liability lies on the shoulders of a single person.

B) In group lending the monitoring transfers to the group whereas in individual the monitoring is done by MFI.

C) Disadvantages -

1. The risk of one member's payment may fall into other members obligation to pay

2. The amount of loan sanctioned is very less

3. Group loans have more interest rates than indivvidual loans

4. Every member is dependend on each other