The impact of competitive advantage on the sustainability of microfinance institutions in Ghana: assessing the moderating role of capacity building

Mensah Marfo (), Eleazer Fianko Ofei (), Edward Annan (), Abiel Ashitey Armah (), Linda Adadevoh (), Biriwaa Ofei Evelyn () and Carl Reindolph Asante ()
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Mensah Marfo: Accra Institute of Technology (AIT)
Eleazer Fianko Ofei: Accra Institute of Technology (AIT)
Edward Annan: Accra Institute of Technology (AIT)
Abiel Ashitey Armah: Accra Institute of Technology (AIT)
Linda Adadevoh: Nobel International Business School (NIBS)
Biriwaa Ofei Evelyn: Entrance Pharmaceuticals Limited
Carl Reindolph Asante: Accra Institute of Technology (AIT)

SN Business & Economics, 2025, vol. 5, issue 7, 1-40

Abstract: Abstract This study examines the impact of competitive advantage on the sustainability of microfinance institutions (MFIs) in Ghana, with a focus on the moderating role of capacity building. The study employed a cross-sectional design with an explanatory approach. Data were collected from a sample of 500 managers representing 150 microfinance institutions (MFIs) in Ghana. A quantitative research approach was adopted, utilizing structured questionnaires as the primary data collection tool. To analyze the relationships between competitive advantage, capacity building, and MFIs' sustainability, structural equation modeling (SEM) was applied. The study found that competitive advantage and capacity building have a positive and significant impact on the sustainability of microfinance institutions (MFIs). Specifically, competitive advantages, such as superior customer service, innovative products, and effective marketing strategies, contribute directly to the long-term viability of MFIs. Additionally, capacity building through initiatives such as staff training and development, technological advancements, knowledge sharing, information sharing, and partnership development enhances the sustainability of MFI. Moreover, capacity building was found to moderate the relationship between competitive advantage and MFI sustainability, amplifying the positive effects of competitive advantage on organizational performance. This study integrates the competitive advantage theory and the resource-based view (RBV) to offer a deeper understanding of MFI sustainability. Competitive advantage theory highlights how external strategies, such as innovation and customer service, help organisations gain a competitive edge, while the resource-based view (RBV) emphasises the importance of internal resources, including human capital and infrastructure, for sustaining a competitive advantage. By introducing capacity building as a key internal resource, the study shows how MFIs in Ghana can leverage competitive strategies and internal capabilities to enhance their long-term sustainability. For practitioners, this highlights the importance of investing in both external competitive strategies and internal resource development to better serve underserved populations and ensure the sustainability of microfinance institutions (MFIs). This research provides a novel perspective by examining the moderating role of capacity building in the relationship between competitive advantage and MFI sustainability. It contributes to the existing literature by focusing on the Ghanaian context and providing actionable strategies to improve financial inclusion and economic empowerment in underserved communities.

Keywords: Competitive advantage theory; Elements of competitive advantage theory; Resource-based view theory; Capacity building; Sustainability of microfinance institutions (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s43546-025-00857-0

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