Assessing the effects of micro credit on the performance of women owned Small and Medium Enterprises in the Tamale Metropolis

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JUNE, 2015
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Women owned Small and Medium Enterprises constitute 75% of the total SMEs in Ghana and provide enormous contribution to the economic growth and employment creation of the country. In view of this, it is necessary to obtain a better understanding of the factors that influence the performance of these enterprises. Key among these factors is credit. However, traditional banks shy away from SMEs because of the high risk associated with lending to SMEs. This led to the springing up of several Microfinance institutions with the sole aim of providing credit to SMEs especially women owned enterprises. However, there have been concerns as to whether these Microfinance Institutions are in business to support these enterprises grow or exploit them and earn higher profits. It is therefore vital to establish whether micro credit is supporting the growth of businesses or making them worse off, a gap this study sought to fill. To carry out the study, five Microfinance Institutions in the metropolis were purposively selected. After which stratified sampling was used to categorize the women entrepreneurs according to the activities they are engaged in. Semi structured questionnaire was then used in the survey of women owned SMEs as well as the administration of questionnaires with selected Microfinance Institutions. The data collected were analysed using SPSS. The study findings show that although the general indicators reflect positive growth among women owned enterprises in terms of gross profit, investigation of the practical importance of the significance of the results show a small effect (d=0.315). This implies that the change in the monthly gross profits between the two time periods is of less practical importance to the operation and growth of the enterprises. The results also reveal that there was no significant difference in the number of employees or assets between the period when the first MFI loan was received and the period when this study was conducted. The study recommends improved monitoring by the Bank of Ghana to regulate the operations of MFIs in terms of interest rates charged and other services they offer their clients. It is also recommended that MFIs take interest in the enterprise growth of their clients instead of being interested only in the collection of deposits and disbursement of loans. Finally, the study also recommends that, MFIs should increase loan amounts to women entrepreneurs, extend loan repayment period, charge moderate interest rates on loans as well as administrative and management fees, ensure timely disbursement of loans and enhance and standardize training of their clients.
A thesis submitted to the School of Graduate Studies Kwame Nkrumah University of Science and Technology, Kumasi in partial fulfillment of the requirements for the degree of Master of Science in Development Policy and Planning.