The effects of microfinance interventions on the development of SMEs in the Bekwai Municipal Assembly

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August, 2015
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Most Small and Medium Enterprises (SMEs) in the developing world rely mainly on microfinance for their operations. There is therefore the notion that the boom in the SMEs sector, particularly in developing countries is due to the advent of micro financing. However, some critics of the microfinance concept differ on this notion. The purpose of this research is therefore to assess the effects of microfinance interventions on the development of small and medium enterprises (SMEs) in Ghana using the Bekwai Municipality as the study area. The cross-sectional survey approach was employed to carry out this research. Simple random sampling technique was employed in selecting 144 SMEs that constituted the sample size in addition to five Micro-finance Institutions (MFIs). Structured questionnaire was designed to facilitate the acquisition of relevant data which was used for analysis. Descriptive statistics which involves simple percentage graphical charts and illustrations were used in the data presentation and analysis. The findings of the study show that, for SMEs in the study area to be eligible for microfinance, they are required to have an account and must have saved for six months with the MFIs, provide collateral security, and perhaps, demonstrate the viability of the project/business for which the microfinance is being sought. It also revealed that, in addition to the mainstream financial assistance (microfinance loans) given to SMEs by the MFIs, other vital non-monetary supports including financial advisory services, book keeping and managerial capacity training are provided to the SMEs. The study therefore shows that, as a result of microfinance interventions in the Bekwai Municipality, most SMEs have experienced growth and this is manifested mostly in terms of increased working capital and average monthly earnings. However, the main challenges that face SMEs in the study area include the insistence of collateral (42.4 percent), high rate of loan application rejections (34.7 percent) and lack of support for startup SMEs (22.9 percent). The study recommends that, microfinance institutions should always monitor the activities of SMEs they grant loans and provide them with the necessary technical assistance to put them on track to ensuring that microfinance loans are invested profitably to bring down the rate of default in loan repayment; SMEs should endeavour to register their businesses to enhance their credibility and also, form associations to promote their collective interests.
A Thesis Submitted to the School of Graduate Studies, Kwame Nkrumah University of Science and Technology in Partial Fulfillment of the Requirements for the Award of Degree of Master of Science in Development Policy and Planning,