The Role of Chieftaincy in Financial Inclusion: A Case Study of Eight Rural Communities in the Northern Region of Ghana

Abstract

Misunderstood customary political and social institutions can jeopardize attempts at introducing microfinance into rural villages. This paper examines how microfinance institutions approach the chieftaincy system in Ghana. Using insights from over 200 interviews across 8 communities and 10 microfinance institutions in the Northern Region, observations are made regarding the equity and efficiency of the private and public sector processes aimed to increase financial inclusion. The investigationÕs findings suggest a number of recommendations for all key actors regarding the effective delivery of microfinance services. First, microfinance institutions must make a better effort of engaging the District Assembly to give credit to the local government structure and take advantage of its valuable platform, more clearly communicate their community selection criteria to prospective clients, and be wary of the cultural consequences of singling out women. In turn, traditional chiefs and elected Assemblymen, the official linkage between chieftaincy and the central government, need to practice due diligence with outside visitors, encourage internally led development projects to enhance community capacity and mobilize local residents and resources to demonstrate a self-help mentality. Finally, community members must also take responsibility as clients and the ultimate beneficiaries of microfinance delivery to keep their local leaders honest and proactive as well as being willing to contribute to community projects.