The roles of non governmental organizations in the financing of micro enterprises in Ghana: A case study of Sinapi Aba Trust (SAT).

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Micro enterprises play very useful roles in the economies of developing countries but they remain largely informal and therefore find it extremely difficult accessing credit from the traditional financial institutions. Banks and other formal financial institutions have become very elitist in their operations and thus creating a vacuum in the financial sector with regards to financing of micro enterprises. Several micro finance institutions have emerged in an attempt to fill this vacuum. There is therefore, the need to assess the roles that these MFIs play in the businesses of their intended beneficiaries in order to determine which direction the industry should be headed. This study has looked at the roles of one such MFI; Sinapi Aba Trust (SAT) in two communities, Kasei (rural) and Kumasi (urban) both in the Ashanti region and the performance of the organization over the five-year period 1998 - 2002. The methodology employed involved the administration of questionnaire on selected beneficiaries from the 2 locations, an interview with a key person at the MFI and extensive desk work. The study has established that, SAT’s loan interventions have made significant impacts on the businesses of its clients and also on the livelihoods of clients’ and their households. Impacts have been made in the following areas • Access to quality healthcare • Improved household food security • Enhanced access to education for beneficiaries’ children • Improvements in housing infrastructure The study has also established that SAT has demonstrated consistent and remarkable profitability, efficiency, outreach and portfolio quality. Data available suggests that SAT has been able to consolidate its financial position and has also been able to maintain or improve its performance. The organization is in the process of transforming into a Savings and Loans Company to enable it better serve the banking needs of its clients who remain largely small businesses. The present financial position of the organization will allow for this transformation and perhaps it is also about time that it considers providing long-term financing to its clients. The following are some of the recommendations made from the study. • Micro enterprises need to be supported not only in the form of credit provision but also through the provision of training support. • The micro finance sector itself needs be strengthened and supported to effectively play their roles as financial intermediaries. • Non Governmental MFIs should also design innovative and attractive products to enable them mobilize deposits from their clients and thereby remain in competition. • The government should also provide the enabling environment for the development and growth of the micro finance sector. This may be done in two key areas: 1. Ensuring the right economic environment that will ensure that MFIs operate sustainably. 2. A strict regulatory, monitoring and supervisory role of the Bank of Ghana (BoG) to bring sanity to the sector and ensure that it develops. • Further studies should be conducted into the several areas that this study could not adequately deal with due to time and other resource constraints.
A thesis submitted to the school of Post Graduate Studies, Kwame Nkrumah University of Science and Technology, (KNUST) Kumasi in partial fulfillment of the requirements for the degree of Master of Business Administration (MBA), 2008