Microcredit association chair blames weak lender risk assessment for loan defaults

Benjamin Turkson Junior, chairperson of the National Micro Credit Association Ghana, has pointed to weak risk management systems in lending institutions as a major cause of loan defaults. In an interview at the association's Annual General Meeting, Turkson urged financial institutions to improve their assessment of prospective borrowers and implement effective measures to determine their creditworthiness.

He emphasized that lenders should shoulder greater responsibility for ensuring loans are granted to customers capable of repaying them. "We don't have bad borrowers, but we have bad lenders," Turkson stated. He argued that a robust risk management framework would enable lenders to identify reliable borrowers and minimize loan defaults.

While criticizing lending practices, Turkson acknowledged that some borrowers intentionally fail to meet repayment obligations. He emphasized the interdependence between lenders and borrowers, urging customers to honor their repayment commitments to maintain the sustainability of financial institutions. Turkson also encouraged lending institutions to utilize credit reference bureaus licensed by the Bank of Ghana to evaluate borrowers' borrowing histories.

He warned that borrowers who do not repay loans risk damaging their credit records and facing difficulties accessing credit from other financial institutions. Turkson urged lenders to pursue outstanding debts through legal procedures, advocating a lawful approach to loan recovery to protect the interests of both financial institutions and borrowers. He appealed to lawmakers to understand the challenges facing the microcredit sector.