Mr Mark Owusu Ansah, Micro-finance Co-ordinator, Ghana's Ministry of Finance, said on Monday that there is a need to search for the root causes of the weaknesses of financial inter-mediation and improve upon it to ensure rapid development of small and micro-enterprises.

This, he said, would require new perspectives on rural finance that permit a broader view of the process of inter-mediation necessary to meet the financing needs of small and micro-enterprises in an effective, efficient and sustainable manner, Ansah told the opening section of a five-day Africa regional conference of the International Network of Alternative Financial Institutions (INAFI) in Accra.

INAFI is a coalition of alternative savings and credit institutions outside the main conventional banks with its target being people in low-income groups. Starting with four members in 1996 on a budget of 10,000 dollars, the Nairobi-based INAFI now has 18 member institutions from Africa, Asia, Latin America and Europe. Its present budget is in excess of one million dollars.

More than 20 participants from member institutions attending the conference will share experiences and reflect on the way forward with particular emphasis on exploring new innovations that could broaden members' initiatives in the micro-finance area for enhanced impact.

Ansah said lack of access to external finance in the form of appropriate credit and equity capital continues to constrain the growth and expansion of micro and small enterprises.

He said established micro and small enterprises cannot obtain sufficient overdraft and fixed capital facilities, let alone obtain medium-term project loans through conventional banking systems.

He attributed the failure to reach a large number of small borrowers to the lack of a system to analyze and service small credits, lenders' fear of high-perceived risk and high transaction cost and scanty information on low borrowers. Aside, small borrowers have no credit history in addition to lacking reasonable collateral.

They also do not have financial statements and business plans. Ansah said that although credit is often viewed as the entry point for initiating development activities among small and micro-scale entrepreneurs, experience shows that provision of credit itself may not prove an effective instrument for raising production and income in the sector.

Ansah said: "Credit may need to be supported by access to improved technology, financial management and infrastructure facilities." He said there is a need to focus on developing financially sustainable rural intermediaries that are linked to the financial system and provide a more permanent solution than project finance and direct credit.

This would mean diversifying portfolios and managing systemic risks associated with agricultural financing. Mr Stephen Mirero, Executive Committee Member of INAFI, in his report, said in the first quarter of the year, the Africa Regional Secretariat continued to raise funds for the three-year programme of activities from 2000-2002.

INAFI has already held workshops on Management Information Systems (MIS), governance and Internal Control and Audits this year. Mirero said other activities INAFI has organised are an internship programme and an executive committee meeting in Nairobi.