The institutional and regulatory framework of co-operative societies in Ghana: implications for credit unions

Co-operative societies are financial institutions that focus on servicing the banking and lending needs of its members. They fall within the semi-regulated sector of the financial sector, where the state does not provide for stringent regulations. Co-operative societies promote the welfare of the communities where they operate and this holistically enhances development of all classes of people in these communities. As a microfinance unit, credit unions operating as co-operative societies have been of much interest to some developing governments, policy makers and their membership, particularly, the implications of the regulatory and institutional framework of credit unions for their financial sustainability. Whilst some have doubted whether as a microfinance unit, co-operative societies can help the poor and still remain sustainable, others have argued that such financial institutions are more likely to weather financial storms and effectively serve the poor in unstable economic countries. The purpose of the study therefore was to examine the regulatory and institutional framework of credit unions and its implication for growth. The study adopted a cross-sectional survey design. The results of the study showed that unlike other microfinance institutions, credit unions are regulated by various regulatory agencies, including the Registrar of Co-operative Societies and the Ghana Co-operatives Credit Unions Association (CUA). It also revealed that even though credit unions are able to meet the needs of the poor and low to middle income earners, there is an urgent need to review both the institutional and regulatory framework to ensure efficiency and financial sustainability of such credit unions.