Towards a sustainable micro finance scheme for women entrepreneurs in small and medium scale enterprises in Brong Ahafo Region

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Over the past few decades, the provision of financial services dealing with micro finance for women in Small and Medium Scale Enterprises (SMEs) has been the concern of both the government and non-governmental organizations NGOs). The promotion of small and medium scale enterprises development has also become a major concern to the government of Ghana. Currently the government has set up the women’s ministry to see to the affairs of women. One of the areas the sector will tackle will be to provide financial assistance to women in SMEs. Many SMEs micro finance schemes in the developing countries have not proven sustainable in the long run. Ghana is no exception to this situation. Women entrepreneurs are mostly concentrated in the operations of SMEs. These women require capital either to start a business or to run it. The financial position therefore, to a large extent, determines their influence in their day-to-day activities and also reflects a measure of their business success. Women entrepreneurs in SMEs are faced with the problem of how to access sustainable financial interventions. It is thus important to identify the factors that hinder the sustainability of micro finance schemes and find solutions to them. The study assessed the financial, managerial and organizational performance; the instruments being used by micro finance institutions (MFIs); and the effects of the microfinance schemes on the businesses and livelihoods of women entrepreneurs. The key concept “sustainability” was defined in order to throw more light on the factors that need to be considered by both MFIs and beneficiaries. A framework for analysing the sustainability of micro finance schemes was proposed and some factors were identified and applied as determinants of a sustainable micro finance scheme. The sustainability determinants include: • efficient management of microfinance scheme; • adequate institutional and manpower capacity; • high operational effectiveness - earned income exceeds operational cost; • high recovery rate minimum default; • competitive lending rate: • regular inflow of loanable funds to re-capitalise schemes; and • effective utilization of credit facilities to improve upon standard of living. This study was carried out in five districts in the Brong Ahafo Region, namely: Sunyani, Nkoranza, Wenchi, Techiman and Tano Districts. Four schemes, namely: the District ‘Assembly Poverty Alleviation Fund (DAPAF), the Sinapi Aba Trust (SAT), Enhancing Opportunities for Women in Development (ENOWID) and Freed From Hunger (FFH) were examined to determine how sustainable their operations were in providing credit to women in SMEs. The study identified a number of factors and problems including; inadequate flow of loanable funds leading to the schemes not being able to re-capitalise themselves, lack of capacity building for both institutions and beneficiaries affecting their effective performance, inadequate loan size (DAPAF) and inability to assess impact of schemes on beneficiaries, among others, as hindering the sustainability of SMEs credit schemes, The study found out that 10 per cent of beneficiaries could not effectively utilize the credit given them. The credit was not used for its intended purpose, they used it for the upkeep of their families. The SAT and FFH are still dependent on donor support, and this hinders their movements towards financial independence. This will not make the schemes financially sustainable. Political interference on the DAPAF scheme gave beneficiaries a perception that loans are free and is not to be re-paid. This leads to low recovery rate. The study concluded by providing specific recommendations including loan utilization monitoring, continuous impact assessment, ability of MFIs to cover cost, incentives, regular review of mission, and participatory monitoring and evaluation. There is also the need for the government to create a stable macro-economic environment that would facilitate the sustainable operation of SMEs credit schemes. To promote growth and development of women entrepreneurs in SMEs, emphasis should be put on the factors that leads to sustain the provision of financial services in the long term.
A Thesis submitted to the School of Graduate Studies, Kwame Nkrumah University of Science and Technology, Kumasi In partial fulfilment of the requirements for the Degree of Master of Science in Development Planning and Policy, 2001