An Evaluation of Sustainability and Subsidy Dependence of Microfinance Institutions in Ghana

The research aims to explore the understanding of the relationship between sustainability of microfinance institutions (MFIs), subsidy dependence index (SDI) and operational self-sufficiency (OSS).The research study is based on initial exploratory study by analyzing data on 14 executive directors in qualitative interviews and 116 relationship executives in research questionnaires. The microfinance institutions identified were the Financial Non-Governmental Organizations (FNGOs), the Savings and Loans Companies (S&L), the Credit Unions (CUs), the Rural Banks (RBs) and the SUSU Companies. Multiple Regressions which allows for the testing of theories or models established a significant relationship between the Operational Self Sufficiency (OSS) and the predictors, especially the drop-out rate of clients and average loans. The Subsidy Dependence Index (SDI) was calculated for the various types of MFIs and the result was a high dependency ratio especially among the FNGOs. Though the dependency is on the decline, it is very slow indicating that most MFIs will depend on subsidies for a very long time to come. Key words: Subsidy dependence; Sustainability; Operational self-sufficiency; Viability; Microfinance