European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) DOI: 10.7176/EJBM Vol.11, No.25, 2019 97 Relationship Between Financial Regulation and Microfinance Institutions Sustainability and Outreach in Northern Ghana Dr. Issahaku Salifu 1* Dr. Boadu Ayeboafo 1* 1.Faculty of Business, Tamale Technical University, P. O. Box 3, E/R, Tamale, Northern Region, Ghana 2.Faculty of Business, Kumasi Technical University, P. O. Box, Kumasi, Ashanti Region, Ghana Abstract Purpose: This study examined the relationship between financial regulation of microfinance institutions and their sustainability and outreach from the view point of managers and operation staff in northern Ghana. Methodology: The study used primary data. Purposive and convenient sampling techniques were used in selecting 189 managers and operating staffs across 18 microfinance institutions operating in northern Ghana. In addition, the researchers purposively sampled 5 experienced senior staff from the Bank of Ghana. Data was collected using structured questionnaires, which was personally administered by the researchers and two research assistants. Research assistants were trained by the researchers on the ethics of this study before and during the data collection process. Data collected was analysed using Spearman’s correlation and descriptive statistics. Findings: The study found positive statistically significant relationship between financial regulation and financial sustainability and outreach among managers and operation staff of MFIs surveyed in northern Ghana. The study further found that financial regulations of MFIs in northern Ghana affected sustainability and outreach. Originality: This study adds to the literature on financial regulation and microfinance sustainability and outreach in the context northern Ghana. Limitations: This study is limited to only northern Ghana and not Ghana in its entirety. The study was delayed due to publication processes and other factors and changes might have taken place in the microfinance industry in northern Ghana. However, this notwithstanding, the results of the study are still relevant for publication. Keywords: Financial regulation, Sustainability, Outreach, Ghana, Microfinance institutions. DOI: 10.7176/EJBM/11-25-10 Publication date:September 30 th 2019 1. Introduction Several social intervention programmes, including the Livelihood Empowerment against Poverty (LEAP), Capitation Grant, School Feeding Programme, free distribution of school uniforms, exercise books and textbooks, elimination of schools under trees, have been implemented with the aim of alleviating poverty among the vulnerable population in Ghana in the past twenty years. Other projects aimed at improving health care delivery have also been implemented. These include the establishment of Community-based Health Planning Services (CHPS), national immunization against polio and indoor residual spraying against malaria carrying mosquitoes (Ghana Living Standard Survey Report, 2014). The above notwithstanding microfinance is one of the most prominent and most effective interventions as far as poverty reduction is concerned and as a result, its sustainability in Ghana and in particular the poorest regions (northern Ghana) cannot be overemphasized. Microfinance is banking for the poor people in society, in particular developing countries including Ghana. Microfinance Institutions (MFIs) are institutions that provide financial services such as credit, savings and insurance to low income clients who traditionally lacked access to credit, banking and related services (Akinosi, Nordlund & Turbay, 2011). Nurmakhanova, Kretzschmar and Fedhila (2015) define MFIs as those offering banking services to the poor customers who have no access to the traditional financial sector. MFIs provide financial services to the low-income households in developing countries around the world (Bogan, 2012). The main objective of most MFIs is to reduce poverty in society. Poverty is defined by the UN (2005) as deprivation of necessary power, source and capability to have a decent live and to actualize the political, economic and social rights (Davutoğlu, 2013). Although MFIs argue that they work to promote financial inclusion by delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society but the interest rate offered by MFIs does not suggest that is really the case (Akinosi, Nordlund & Turbay, 2011). In Ghana, the practice of sourcing funds from non-formal financial institutions dates back to 1955, when the Canadian Catholic Missionaries established the first credit union in northern Ghana. The concept was expanded at the beginning of the 1970s with the establishment of the first rural bank at Nyakrom. Since the activities of such institutions were not considered as part of mainstream financial sector, their contribution to financial deepening was neither documented nor recognized until the latter part of the 1990s, when issues of poverty reduction became part of developmental agenda. The shift from growth-led strategies to poverty reduction strategies provided an avenue for pro-poor policies and programmes. Recognizing access to credit as a major constraint to the promotion of pro-poor activities, a number of institutions (governmental and non-governmental) emerged to provide financial services to the poor (Annim, 2011; Aveh, 2011)