Herding Behaviour and Investment Decisions of Individuals With Fraudulent Microfinance Institutions in Ghana

Abstract

Access to credit and financial services of sections of the societies in low-income developing countries has led to the proliferation of genuine and fraudulent microfinance institutions in recent times and this has been the subject of intense interest by researchers. This study explores the sociological and psychological factors that influence investment decisions of individuals with microfinance institutions to maximize their economic wellbeing in spite of the high incidence of atrophy of such institutions and fraud. This is an exploratory research which adopted a descriptive analytic approach in the analysis. In all 165 respondents were purposively selected from five administrative areas in the Brong Ahafo Region in Ghana. The study found that out of the total respondents of 165 who ever engaged in business with microfinance institutions, 119 of them have ever been swindled by microfinance institution. The respondents exhibited herding behaviour in their investment decisions with these fraudulent microfinance institutions. These fraudulent microfinance institutions used interest rate as a conduit to deceive and lure people to save with them. The respondents used bounded rationality in their investment decisions which resulted in the bad investment with these fraudulent microfinance institutions.