The Effect of Microcredit on Beneficiaries in Koforidua

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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 iii 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.
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,