Add the following to your sshd_config file.
Usually either: /etc/ssh/sshd_config
or /etc/sshd_config
Subsystem sftp internal-sftp
Match group filetransfer
PasswordAuthentication yes
ChrootDirectory %h
X11Forwarding no
AllowTcpForwarding no
ForceCommand internal-sftp
Restart ssh server.
Usually: /etc/init.d/ssh restart