An Investigation into the Impact of Microfinance in Poverty Reduction in Less Developed Countries (LDCs): A Case of Ghana

Aaron Kumah, Williams Kwasi Boachie

Abstract


The paper attempts to provide a critical appraisal of the debate on the effectiveness of microfinance as a universal poverty reduction tool. It argues that while microfinance has developed some innovative management and business strategies, its impact on poverty reduction remains in doubt. The instrument for data collection is structured questionnaire. The study was carried out in Ashanti Region of Ghana. Using a sample size of 380 clients from various microfinance institutions (MFIs) within the research area and a survey with descriptive analysis, the result reveals among others that the clients enjoy opportunities for savings which enable them to increase their income levels by way of using their savings to acquire basic necessities of tools, equipment and materials and are able to create employment and improve their standard of living. Thus, microfinance, however, certainly plays an important role in providing safety-net and consumption smoothening. The study therefore recommends among others an urgent refocus on the promotion of micro-savings, a robust financial sector regulation and improved financial support to the MFIs by government and other stakeholders to help in the world’s effort in respect of poverty eradication agenda.


Keywords


Microfinance; Poverty; Ghana; Consumption smoothening; Africa; Micro-savings.

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