Inadequate education on financial rights results in poor decisions – Amoah
Mr Kobina Amoah, Microfinance Director, Ministry of Finance and Economic Planning, on Thursday expressed concern about the imbalance of power between financial institutions and their clients resulting in clients making poor borrowing decisions.
He said individuals who are functionally illiterate, first-time consumers are particularly vulnerable and that even middle-income and relatively educated clients who are insufficiently informed about their rights and could be pressured into making poor decisions.
Mr Amoah said this at the opening of the 5th Microfinance conference organised by the Faculty of Social Science of the University of Cape Coast under the theme “Beyond the existing microfinance, What Next?”
He stressed the need for financial institutions to start engaging in consumer education and protection to safeguard the interest of consumers of financial services and empower them to know their rights and liabilities and make wise and informed decisions
The two-day conference which is being attended by academics, planners, policy makers and chiefs is among others to deliberate on the importance of microfinance in the development of the country.
He said the government was ready to support consumer education and protection as well as empower clients to know their rights and responsibilities so that when it comes to access financial services they would be in a position to make well informed decisions and choices.
Mr Amoah expressed regret that despite the development of the sector less than 20% of households benefit from access to formal financial services such as savings, loans insurance and investment.
He said a survey conducted recently revealed that the level of knowledge about financial institutions, their services and products among urban and rural Ghanaian adults was low and that even when consumers are knowledgeable their knowledge often does not translate into their behaviour.
Mr Amoah said the sector had seen a rapid growth in terms of institutions, deposits and networks and that the number of financial institutions in the country had risen from 332 in 2003 to 660.
“There has been a remarkable deepening of the financial sector especially through reforms of the regulatory and institutional environment.”
“I wish to emphasize that we all recognise that institutional aspects of consumer protection measures is the ethical commitment of financial institutions to pro-client principles” he added.
Mr Amoah said financial capability was very high on the political agenda of the government.
The Vice Chancellor of the UCC, Prof Naana Jane Opoku- Agyeman, said microfinance, which is a potential approach to development, provides a financial leverage for poor households and also stimulates economic growth at the macro level.
She said that microfinance for the last two decades in Ghana had taken the form of saving and loans and that the time had come to develop innovative ways of promoting microfinance in terms of products, service delivery, consumer education and financial literacy.
Prof Opoku-Agyeman called for use of innovative products such as micro-leasing, micro-money transfer and micro-insurance, adding that they were essential for financial sector deepening and economic growth.
The Central Regional Minister, Mrs. Ama Benyiwa Doe, said the government recognized microfinance as an instrument for wealth creation and poverty reduction and was committed to reviewing its own microfinance and small loans scheme to make it more effective.