The Effect of Microcredit on Beneficiaries in Koforidua
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Date
2015-02-20
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Abstract
Microfinance has become wide spread in the country. The assertion that needs to be
discussed is how do these MFIs affect the lives of the people who access their products in
the areas where they are operating? To what extent are these institutions having impact
on their beneficiaries through the microcredit they provide? Has the poverty level
reduced in those areas as microfinance is claimed to do? What are the answers to these
questions? It is for this reason that this study has been undertaken to know what
microfinance does for the clients in Koforidua.
This study therefore investigated the effect of microfinance on clients in Koforidua
focusing on household income, poverty reduction and expenditure on food.
The study employed the Ordinary Least Squares (OLS), logit analysis and probit
analysis. These were used to estimate the effect of loans on household income and
relationship between household participation and food expenditure, effect of loans on
poverty and probability of households to participate in microfinance programme
respectively.
The study found that the amount of loans received by a household had a positive and
significant impact on household income. This same variable on the other hand reduced
the poverty level of those living below the poverty line. However the depth of the impact
of microfinance on poverty was found to be shallow when the poverty levels of
programme and non-programme households were compared. The expenditure on food by
households in the low income bracket who normally access microfinance services mostly
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takes a high percentage of their income. The participation of a household, however, in
microfinance programme has no significant effect on the households’ expenditure on
food.
The study concludes that apart from loans the other services provided by microfinance
institutions need to be marketed effectively. This will help assess the overall effect of microfinance on clients in Ghana and the world at large.
Description
A Thesis Presented to the Department of Economics,
Kwame Nkrumah University of Science and
Technology, in partial fulfilment of the
requirements for the award of a Master of
Philosophy Degree in Economics,