n African Finance Journal - Forging linkages between formal and informal financial sectors : emerging practices in Ghana




This study contributes to the search for ways to forge linkages between the formal and informal financial sectors in areas that banks alone are unable, or unwilling to serve. Emerging practices in Ghana suggest that this can be done through process and product innovations. Process changes involve the use of outreach services and mimicking successful practices of the informal sector. Product changes include the linking of savings and credit, building loans into non-rotational savings cycles, and the adoption of fixed ratio credit-saving schemes. Innovations aim at knocking down literacy barriers that deter demand for banking services and limiting the formality of when and where banking must take place. The thrift institutions have been the primary agents of change. Although some initiatives may be problematic, their local experimentation and self-reforming may be the best way to achieve financial deepening. Sound institutional support, increased supervision and field examinations are necessary to encourage innovations, ensure early corrective actions while guiding against excessive risk taking.


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