Effect of micro-finance activities on the survival of small and medium scale enterprises

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Small and Medium Scale Enterprises (smes) have over the years become increasingly important to the growth of Ghana’s economy. Their prominence came into the limelight in the late 1970s and early 1980s due to the economic recession which led to the decline of industrial growth and employment in many developing countries. Smes play important role in the growth of the economy and it is estimated that smes are the engine of growth in Ghana’s economy as they employ about 85% of the Ghanaian work force and contribute about 70% to the country’s Gross Domestic Product (GDP). However, the issue of financing has become a major constrain for smes in Ghana and despite the major role smes play in the economic development, they may cease to exist when they are unable to have access to the needed financing. This study seeks to improve understanding of the microfinance and SME performance debate and more especially to add the Ghanaian perspective. The study investigates whether activities of microfinance institutions are able to improve the performance of smes in Ghanaian. Whiles several studies focused on the impact of smes on the economy, this study focused on a variety activities to measure the effect of microfinance on SME performance. The research questions addressed whether activities of microfinance institutions had a significant effect on the performance of smes within the periods of January, 2017 to December, 2019. The target sample was 397 respondents selected from 50 smes. Cross-sectional data was obtained from the questionnaires distributed to respondents. The study used SPSS to analyze responses and factor analysis to determine whether there was a statistically significant relationship between the performance of smes and the activities of microfinance institutions. The findings revealed that the activities of microfinance institutions such as availability of credit, depository services, business advisory services and loan insurance had significance positive effect on the performance of smes between the period of January 2017 to December 2019.
A thesis submitted to the institute of distance learning, Kwame Nkrumah university of science and technology in partial fulfillment of the requirement for the award of the degree of the master of science in accounting and finance