Micro-Financing as a Means of Poverty Reduction “The Case of Sinapi Aba Trust”

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The dynamic roles of small scale enterprises in developing countries cannot be overemphasized. These enterprises have been identified as the means through which accelerated growth and poverty reduction as well as other developmental goals of developing countries can be achieved. The sector is faced with a lot of constraints which threaten the achievements of its full potential. Some of the constraints relate to lack of or inadequate credit, lack of capacity or the technical know-how to effectively manage their businesses and the absence of suitable policies and programmes to address their plight. The emergence of microfinance is thought to provide answers to the numerous problems faced by small scale enterprises. Microfinance institutions are expected to provide suitable financial services with education. Some of the services include the provision of credit, facilitate and inculcate the habit of savings in entrepreneurs and the provision of educational programmes to build the capacity of entrepreneurs all of which are geared towards improving the incomes of household. The focus of the study was on the importance and effectiveness of Micro Finance Institutions (MFIs) in the Small Scale Enterprise (SSE) sub-sector of the economy more especially with respect to growth and poverty reduction. The specific objectives included analysis or assessment of effectiveness of Micro Finance Institutions packages that are extended to Small Scale Enterprises and analysis of MFI strategies and the growth promotion processes of the small scale enterprise sub-sector. The methodology was a case study of Sinapi Aba Trust, a microfinance institution in Ghana. Data for analysis were gathered from both primary and secondary sources. Personal interviews were conducted among officers of MFIs and entrepreneurs of SSEs. While secondary data were obtained from published and unpublished sources. The main analytical tools used to analyse the data included simple tables, cross- tabulation, illustrative charts and simple regression model. The main findings that came out of the analysis included the fact that the activities of SAT are pro-poor as reflected in the lending methodology, the target group which is mostly women, loan sizes and its geographic operational areas. It was also found that SAT pays interest on savings by clients though it served as cash collateral. Again SAT provided non-financial support services to its clientele in order to build their capacities. It could be realized that the effort by SAT towards poverty, reduction through its activities is very enormous. This is been done through the promotion and development of small scale enterprise especially in the informal sector by the provision of credit and business support services based on a demand driven approach. Moreover SAT also provided other social services to its clientele relating to health, politics and apprenticeship to unemployed youth. It is arguably right that microfinance may not be an end in itself but the results from SAT is an indication that if it is combined with other developmental activities its full potential to reduce poverty can be realized.
A Thesis Submitted to the Business School, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration, 2009