Assessing the Effect of Microfinance on Cocoa Production in the Ashanti Region of Ghana

This paper assessed the capacity of microfinance to enhance cocoa production in Ghana. Lack of adequate access to credit has been seen as an important factor that prevents smallholder cocoa farmers from expanding their cocoa farms and getting access to inputs such as appropriate pesticides, fertilizers and seedlings. This situation impacts negatively on their cocoa production and their overall household welfare. By providing credit facilities to smallholder cocoa farmers, it is expected that these facilities would enable such farmers to have access to the needed inputs to improve on their cocoa production. Primary data were collected from two cocoa producing communities in the Ejisu-Juaben Municipality of the Ashanti Region of Ghana. Questionnaire was used to elicit responses from 235 cocoa farmers who were randomly selected from the two communities. Multiple and logistic regressions were used to ascertain the influence of access to credit on cocoa production. The results indicate that access to credit had a significant impact on the cocoa production of farmers. Access to credit was also found to be significantly associated with the likelihood of farmers saving. However, loan repayment was a major problem faced by the farmers, due to the inflexible nature of repayment schedules which do not consider the seasonal and risky nature of their farming activities. It is recommended that appropriate microfinance products such as long-term farming loan products be developed for cocoa farmers since many of the smallholder farmers depend on microfinance institutions (MFIs) for loans to finance their farming activities. Furthermore, Bank of Ghana could encourage more MFIs especially rural banks to be sited near cocoa growing areas and make credit accessible to cocoa farmers. Keywords: Smallholder farmers, Cocoa production, Microfinance, Ghana

Microfinance as a Tool for Small Business Growth in Urban Ghana

While a number of studies have shown evidence of positive impact of microfinance on the growth of small businesses, others have shown evidence of microfinance worsening the plight of small businesses by exacerbating their indebtedness. It is in the light of these conflicting views that this study sought to investigate the role of microfinance in promoting the growth of small business in Ghana. Microfinance in Ghana provides a great potential to support economic activities of small businesses. This study therefore, examined the impact of microfinance on the growth of small businesses in urban Ghana. It used responses to structured and unstructured questionnaire elicited from a cluster sampling of 213 clients from 58 microfinance institutions (MFIs) in the Ashanti and Greater Accra regions, the two most urbanized regions of Ghana. Multiple and logistic regression analyses showed that the increase in business profits, stock and business assets after the acquisition of microfinance loans were statistically significant, indicating that the loan amount had significant impact on profit levels, stock adjustments, and acquisition of business assets. However, the change in employment was statistically insignificant. The study recommends the development of appropriate loan products and services that meet the needs of small business operators to sustain and enhance the growth of their businesses. Keywords: Microfinance, Small businesses, Profits, Stock, Business Assets, Employment, Ghana

The Effect of Regulations on Performance of Microfinance Institutions in Promoting Small Business Growth in Ghana

Microfinance institutions (MFIs) have emerged to provide financial services to the poor who were hitherto, excluded from the formal financial system. MFIs have pursued the objective of providing financial services to the poor through two different approaches: the welfarist approach and the institutional approach. The welfarist approach focuses on poverty alleviation by emphasizing the depth of outreach, i.e. reaching the very poor and vulnerable in society with microfinance products. The institutionalists, on the other hand, focus on institutional sustainability by pursuing financial self-sufficiency while serving significant numbers of the poor i.e. breadth of outreach. Despite differences in the two approaches, the performance of MFIs should be assessed on the extent to which they fulfil their common objective of meeting the financial needs of the poor. However, for MFIs to reach out to large numbers of the poor with financial services, their businesses should be conducted on sound operating principles. This requires that MFIs are regulated. Regulation is therefore, important to effective operation of MFIs but can limit their ability to reach the very poor with appropriate financial services. Up until recently, MFIs in Ghana were regulated by various bodies. The rural and community banks and savings and loan companies, regulated by the Bank of Ghana (BoG), had the most rigorous compliance requirements ensuring effective governance. In contrast "susu" operators, regulated by the Ghana National Association of "Susu" Collectors, had the least compliance requirements and the most weak governance structures. This study seeks to examine the effect of regulation on the performance of MFIs in promoting small business growth in Ghana. Small business provides an avenue for income generation by a large segment of the poor, many of whom do not have the qualifications and experiences to be employed in positions that generate sufficient income to meet their needs

Effect of Regulation on Outreach of Microfinance Institutions in Ghana

Microfinance institutions (MFIs) play an important role in enhancing the growth potential of small businesses. However, while regulation ensures that MFIs are financially sustainable, compliance compels them to make large-sized loans to wealthy clients in order to reduce the risk of lending and minimize administrative costs, a situation that compromises their main goal of reaching out to the poor. The study therefore, examined the effect of regulation on breadth and depth of outreach by microfinance institutions (MFIs) in Ghana. The purpose of the study is to find out whether regulation has enabled MFIs to increase their outreach (breadth and depth) thereby improving their sustainability. A mixed methods research design was employed, involving initial hypotheses testing with 31 self-regulated and 24 Central bank-regulated MFIs. The findings were then triangulated with a qualitative research design involving 13 Central bank-regulated and 20 self-regulated MFIs. The results showed that regulations increased the client base of MFIs but reduced the percentage of poor clients served, largely women. It is recommended that the government set up a fund for poor clients to be accessed by well-performing MFIs for provision of financial services to the poor to assist in poverty reduction

The effect of regulations on ability of MFIs to provide sustained financial services to small business

The study examined the effect of regulation on financial sustainability of microfinance institutions (MFIs). A mixed-methods research design was employed involving deductive thematic analysis of interviews with 33 MFI managers. This was followed by t-tests of differences between 24 highly regulated rural and community banks (RCBs) and 31 less regulated "susu" companies on the measures of financial sustainability. A new dimension was added to literature by employing both qualitative and quantitative analysis, giving respondents a voice and ensuring findings reflected their experiences and ideas. Participants recognized an association among financial sustainability, revenue generation and operations efficiency. They noted that regulations provide benefits that improve revenue generation but also increase cost of operations. T-tests showed "susu" companies were more financially sustainable than RCBs. It is recommended that MFIs deliver innovative products to enable owner-managers grow their businesses, while enabling the MFIs to expand their outreach and improve their financial sustainability