Microfinance and its impact on selected districts in Eastern region of Ghana

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
Poverty is one of the most enthralling challenges facing Ghana in recent times. The gap between the ‘haves’ and the ‘have nots’ has been on a steady rise. Like a sick person moving from hospital to hospital in search of treatment, so is Ghana also on the quest of finding an antidote or cure to the problem of poverty. In the search for the antidote, Micro-finance has been found as a major antidote to poverty. Micro-finance brings on board products like micro-credit, micro-insurance and micro-savings. The concentration in Ghana has been on micro-credit. That is, credit is given to the poor to help them start some income generating activities which in the long run will augment the defect in income levels thereby lifting them above the poverty line. The overall aim of the study was to explore the impact of Micro-finance on households. That is, how Micro-finance has impacted on the household income, profit levels and expenditure on children education for participating households. The study is conducted in four selected districts in the Eastern Region of Ghana. The districts were Kwahu North, Manya Krobo, Yilo Krobo and West Akim. The sample survey method is used and data was collected using a quasi-experimental questionnaire. In all 710 households were interviewed. The results from the analysis show that there was significant difference in the expenditure made on children’s education by program households and non program households in all the districts except Manya Krobo. The results also showed that Micro-finance had positive impact on the household income of households in the Manya Krobo and West Akim districts. There was no impact on income in the other two districts. There was also positive impact on the profit levels in the Manya Krobo and West Akim districts. In the Yilo Krobo district, the impact on profit levels was negative. The study has shown that microfinance has some impact on the programme household. However, an in depth analysis to these programmes showed that there has not been any significant decline in the overall level of poverty. This contradictory finding may be due to the fact that microfinance programme has not yet reached the hard core poor in the society. Microfinance institution must expand their base to reach the hard core poor in the catchment areas. Based on the findings of the study the following recommendations were made. There is the need to increase the loan size for clients, given the fact that poverty levels have not significantly changed in the study area. An increase in loan size will have a greater multiplier effect on households’ income through profits from income generating activities. This will intend create many jobs for other unemployed people. The end result will be an increase in the Gross Domestic Product (GDP). Also, there is the need to establish a National Autonomous Microfinance Fund. It will help expand the capital base of Microfinance Institutions (MFIs) so that MFIs can reach a lot of people. The fund would also serve as regulator to Microfinance Institutions (MFIs). It is recommended that MFIs should rather concentrate much resource into savings mobilization. From basic knowledge in economics, capital accumulation has a greater strength to reduce poverty. Savings provides an asset for the economy’s investment in future production. Without them, the economy cannot grow unless there are alternative source of investment. There is also a problem of Information Asymmetry. The bank must employ qualified staff to check background of each client. In this case also it is recommended that proper and strong monitoring teams should be put in place to monitor client activities and how they put the credit facility to use. There is no time frame set for client to be sustainable after which time no credit will be given again. MFIs just enjoy having more clients. This only means that, their programmes do not have the require impact. If MFIs are able to set this time frame for their clients after which no credit would be given, the programme will have significant impact on the lives of its clients. Finally, client must be given basic training in Book Keeping and Budgeting.
A thesis submitted to the Department of Economics, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the degree of Master of Philosophy.