The Role the Co-operative Credit Unions in Contemporary Ghana and Beyond
Introduction
In the idea of promoting the economic and social growth, the introduction of other alternative is necessary. The role of the financial institutions became more emphasized in the introduction of livelihood programs. In this event, Ghana as one of the developing countries in South Africa has the opportunity to link the practices in credit unions towards the economic growth. However, the money transactions in the credit unions might be different as compared to the banking institutions.
What is Credit Union?
Credit unions along with the other cooperative activities evolved from the traditional practice, same as the commercial banking did. The idea and concept of the credit unions is to aid the poor people most especially the people who reside in developing countries. By simply providing them money and making loan transactions, the relationship between the people and the financial institutions are understandably beneficial (Scott, 2009). From the past decades, the activities involved in credit unions in developing countries gained considerable interest from development theorists and practitioners. Thus the same mechanism is applied in Ghana.
Co-operative Credit Unions in Ghana
Credit unions, like the other financial institutions are also regulated and commonly administered by the government. This is done through ensuring that all of the support given by various credit unions leads to the common good of the society (Scott, 2009). In Ghana it is identified that the microfinance system is being regulated by the commercial banks laws. On the other hand, there are a separate laws for the cooperative and non-bank financial institutions. The credit unions in Ghana is performed under the rural microfinance (RMF) and found to be more beneficial to the customers because of the recorded improvement that reflects in the new era of financial institutions. Through the wise combination of a more commercial approach, reconstruction on the sector and recapitalization and building capacity, and lastly strengthening the regulation, the credit unions seems more admirable. The weak performance that mostly identified under the welfare focus and policies of low interest is reportedly became the center of the idea in focusing for a better management and satisfying the services of the credit unions. Albeit there are many limitations in the credit unions, still it is viewed to resist the impacts of changes in financial stream. In addition, there are no stipulated specific provisions regarding the capital requirement on the users but as long as the members can manage and be responsible on their roles, the credit unions will continue to be strong (Basu, Blavy, and Yulek, 2004). In commercial banking, it is still a debate for some developed countries unto how to compensate the arising problems in banking as well as the insurance of the members whenever the financial crises hit them hard. The only answer that they found is through providing stability which may seem impossible because of the financial conditions and uncertainties (Starr and Yilmaz, 2007).
Effectiveness
In the economic liberation of the financial sector of Ghana, there is a strong and competitive financial that can make significant impact in mobilizing the domestic savings in Ghana. In order to manage the new challenges involves in the credit unions and the associations, new policies and institutional mechanisms are needed to transform the credit union movement to a new credit union model (Ofei, 2001). Through this, it is expected that the economy can experience further growth. The role of traditional banking system in Ghana is, however, managed to support the continuous growth in micro and small enterprises (MSEs). Based on the approaches of the business sectors in strengthening the facilitation of MSEs, the assessments can be traced on the investments of the financial institutions which can be both commercial banking and credit unions. It is suggested that the collectors of loans and investments must be insured to regulate their operations. Through the Credit Union Scheme and GCCUA system that is implemented in the country, the fraudulent individuals can be identified and educate the people in supporting the MSEs for the future growth of the nation’s economy (Alabi, Alabi, & Akrobo, 2007).
Conclusion
In the contemporary situation on Ghana, the credit unions became the sole provider of loans and investments for the organizations which only needs a small capital and yet struggles in paying high interest. Since Ghana already recognized the areas in which they can gain the advantages and therefore promote the growth, it is not impossible for Ghana to continue its development.
References:
Alabi, G., Alabi, J., & Akrobo, S.T., (2007) The Role Of “Susu” A Traditional Informal Banking System In The Development Of Micro And Small Scale Enterprises (MSEs) In Ghana, International Business & Economics Research Journal, 6(12) [Online] Available at: http://www.cluteinstitute-onlinejournals.com/PDFs/2007222.pdf [Accessed 17 September 2010].
Basu, A., Blavy, R., & Yulek, M., (2004) Microfinance in Africa: Experience and Lessons from Selected African Countries, (IMF) International Monetary Fund [Online] Available at: http://www.imf.org/external/pubs/ft/wp/2004/wp04174.pdf [Accessed 17 September 2010]
Ofei, K.A., (2001) Retooling Credit Unions: The Case of Credit Union Association of Ghana [Online] Available at: http://www.ilo.org/wcmsp5/groups/public/—ed_emp/documents/publication/wcm_041869.pdf [Accessed 17 September 2010].
Scott, J.A., (2009) Commander and Installation Bank and Credit Unions Liaison Officer Desk Guide, (DFAS) Defense Finance and Accounting Services, [Online] Available at: http://www.dfas.mil/more/referencelibrary/MDA_210-02-D-0003.pdf [Accessed 17 September 2010]
Starr, M.A., & Yilmaz, R., (2007) Bank Runs in Emerging-Market Economies: Evidence from Turkey’s Special Finance Houses, Southern Economic Journal, 73(4):1112.
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