Please describe your proposed solution
The loan portfolio is the most valuable asset for microfinance institutions, but it has often highlighted strategic, operational, technological, and market inefficiencies. Many of these issues arise from a manual approach to managing client onboarding, loan disbursement, and collection. This reliance on manual processes leads to inefficiencies that negatively impact loan performance and the institution's overall profitability. Additionally, manual methods can result in cash suppression, poor financial and client decision-making, high field costs, and increased burdens on both clients and staff.
Over the years, microfinance institutions in Ghana, categorized into Tiers 1-4, have sought suitable software solutions to improve their operations. However, most of the software are either commercially purchased or developed by individuals who lack a deep understanding of microfinance and the specific risks involved. Furthermore, there have been instances where over 100 microfinance companies lost data stored in the cloud with a service provider.
In 2018 the Bank of Ghana closed down numerous microfinance institutions in Ghana primarily due to several interrelated factors and these are presented:
a. Insolvency: A significant number of these institutions were insolvent, meaning they couldn’t meet their financial obligations. This was often due to poor financial management and inadequate capital.
The poor financial management and inadequate capital only point to the fact that loans that have been disbursed did not get repaid as they should, therefore resulting in the erosion of the capital of the institution as well as losses of the savings of poor savers.
b. Regulatory Violations: Many institutions failed to comply with regulatory requirements put in place by the Bank of Ghana. Despite multiple warnings and opportunities to rectify these issues, they did not make the necessary changes.
Given the absence of a strong system that can support the required change that the Microfinance institutions need or reliable technology that can provide an easy way of dealing with areas of weaknesses, the possibility of not being able to comply with the Bank of Ghana requirements are high and therefore the closedown of these institutions.
c. Fraud and Mismanagement: Some institutions were involved in fraudulent activities or misused depositors’ funds, which further eroded trust and financial stability.
Microfinance institutions have not been successful at resolving these problems entirely and thus the need for them to be resolved in a more robust manner.
We are proposing the launch of a feasibility study to assess how the Cardano blockchain technology can address these identified challenges, either through the development of user-friendly software for computers and mobile devices or by creating an application to enhance field operations.
This project would engage
b. 30 Microfinance Companies
c. 3 Fintech Companies
d. Executive Secretaries of these Umbrella bodies of the various tiers.
- The Ghana Microfinance Association Network
- Ghana Association of Microfinance Companies,
- Micro Credit Association Ghana
- Financial Non- Governmental Organisations
Scoping activities will be done across regions depending on data and access.
We will measure the impact of this project by:
a. Assessing how effectively Cardano can address the identified challenges.
b. Evaluating the scalability of the solution across the microfinance sector and its adaptability to regulatory changes.
c. Collecting and analyzing feedback from stakeholders to gauge their willingness to adopt the proposed solution.
Our Approach
STAGE 1: INCEPTION MEETING AND INITIAL ANALYSIS (MONTH 1 & 2 )
1.1 Inception Meeting with Executive Director of Ghana Microfinance Institution’s Network (GHAMFIN)
1.2 Review specific challenges in the Ghanaian microfinance industry, ranging from infrastructure to processes to legal and regulatory to data management; identify potential regulatory challenges or enablers.
1.3 Analyse how the Cardano blockchain could potentially address these issues.
1.4 Develop a brief to map the key challenges to using blockchain to solve the problems.
1.5 Define the scope of blockchain applications suitable for solving the identified problems.
STAGE 2: STAKEHOLDER ENGAGEMENT AND DATA MANAGEMENT (3 -5 MONTHS)
2.1 Identify key stakeholders for the study from amongst MFIs, MFI Clients, Fintech, developers etc)
2.2 Develop a Google quantitative and qualitative questionnaire for interviews to gather perspectives on adopting a blockchain-based digital tool that can respond to identified challenges.
2.3 Conduct preliminary interviews and surveys with selected target groups.
2.4 Develop a Stakeholder Engagement Report with cases.
STAGE 3: INDEPTH ANALYSIS AND DEVELOPMENT OF FEASIBILITY REPORT (6 MONTHS)
Develop a feasibility report with proposed contents as follows:
3.1 Feasibility results on suitability of Blockchain platforms suitable for resolving the identified challenges.
3.2 Estimated costs and potential benefits of developing a digital tool
3.3 Legal and regulatory landscape review results on blockchain in Ghana
3.4 Compile findings and assess overall feasibility.
3.5 Develop a feasibility report
3.6 Organise a Validation Session with Stakeholders on findings
3.7 Prepare Final Feasibility Report and Close Out Report
STAGE 4: CLOSE OUT-REPORT
4.1 Preparation of close-out documents and videos