Dublin Core
Title
The Effect of Microfinance as a Poverty Reduction Tool: A Case of ID Ghana.
Creator
Hamisu Muhammed
Description
The study aims at providing a critical appraisal of the effectiveness of microfinance as a universal poverty reduction tool. It has been argued that while microfinance has developed some innovative management and business strategies, its impact on poverty reduction remains in doubt (Chowdhury, 2009). Microfinance, however, certainly plays an important role in providing a safety net and consumption smoothening. The borrowers of microfinance possibly also benefit from learning-by doing and from self-esteem.
However, to ascertain to ascertain any significant dent in poverty, the study needs to be conducted to evaluate the operational and financial perspective of microfinance institutions and their products. The study aims to examine the effects of microfinance as a poverty reduction tool. The research questions to be addressed include: (a) To what extent do microfinance institutions (hereinafter referred to as “MFIs”) alleviate poverty? and (b) Do MFIs have an impact on Ghana’s financial market? The study provides solution guidelines for regulators and academia in this era of turbulent microfinance industry. A critical literature review was conducted and gaps therein established. Thus, although microfinance is seen to have a positive impact on poverty reduction, other authors refuted it, and asked for more rigorous research in this area. In this study, primary data have been collected using structured questionnaires and interviews. The primary data were directly collected from the field by administering 695 questionnaires across various sub-metros in the Greater Accra region of the Republic of Ghana. Using the stratified sampling approach, the selection procedure for Initiative Development (hereinafter referred to as “ID”) Ghana clients considered several factors and involve multiple stages. The chief limitation of the approach is that the sample may not be representative of the population if it is not carefully selected. Again, the selection process of the interviewees does not give all the population members a fair chance of being selected, due to over reliance on mobile bankers and a small group to identify the target interviewees. Three different data analysis tool were employed. One, Structural equation modeling is preferred by the researcher because it estimates the multiple and interrelated dependence in a single analysis. In this analysis, two types of variables are used, endogenous (dependent) variables and exogenous (Independent) variables. Two, analysis of variance (hereinafter referred to as “ANOVA”) is also used because it enables the researcher to see how effective microfinance products are used to alleviate or reduce poverty. The ANOVA is also able to tell if another intervention can do the same task in a shorter period, whilst costing less in reducing poverty in less privileged communities. Three, simple statistical analysis is also used and the results presented in tables, charts and graphs. The purpose is to summarize data and give an immediate “picture” of the data. From the data analysis, it was observed that economic independence had a positively insignificant effect on poverty Reduction (β = -0.124, p = .343), hence H1 was not supported. Housing and shelter had a positively significant effect on poverty reduction (β= 0.436, p = .000); whilst asset ownership had a positively significant effect on poverty reduction (β = 0.556, p = .001). Furthermore, food & nutrition had a positively significant effect on poverty reduction (β = 0.422, p = .004); whist health & hygiene had a positively significant effect on poverty reduction (β = 0.386, p = .000). Lastly, asset ownership had a positively significant effect on economic independence (β = 0.626, p = .000). Based on the evidence we accept H2, H3, H4, H5, H6 respectively, which are supported by the model and reject H1 as it is not supported by the model. Turning to the ANOVA results, it was observed that microfinance institutions, to some extent help alleviate poverty among women traders. This is evident from the fact that the revenue of participants who took loans, appears to improve post loan. That is to say that, their actual mean performance exceeded the expected results by one percent (1%). In a plain language, the post loan revenue improved by 80%.
The findings of this study have several implications for the academia, microfinance institutions and the policymakers. For academia, this study added new evidence regarding the impact of microfinance on the socioeconomic development of low income households, especially women who cannot access financial services due to their poverty. Thus, it helps theses households to diversify their income and thereby alleviate their poverty. In a nutshell, this study provides an insight into the role of microfinance on women empowerment in the urban and rural parts of a developing country. In the context of Ghana, given the peculiar status of women in the society, coupled with the emerging economic uncertainty in the family system, it has become imperative for them to undertake a venture or economic activities that could stabilize the uncertainties. Prominent among the vast range of sources of capital is the microfinance products. The microfinance provide women with a relative economic stability through employment generation, creates gender parity through empowerment and assets accumulation. It further provides women with the capacity to educate their children and cater for their health needs as well.
In a similar vein, this study suggests that microfinance has the ability to contribute significantly to the achievement of a new economic policy (NEP) and a new economic model (NEM) that guide the achievement of the Ghana Agenda for Job Creation and Poverty Reduction Strategy, through a comprehensive social intervention in the wake of Nation Builders Corp (NABCO), Stimulus Packages; One District One Factory, One Million per Constituency, Entrepreneurial Development Fund and Zongo Development Fund. It does so, through enhancing the socioeconomic wellbeing of poor and low income people especially women. It also plays a central role in creating jobs for women especially those with low education. Therefore, microfinance opens an opportunity for,women borrowers to play significant role in a national economic development.
However, to ascertain to ascertain any significant dent in poverty, the study needs to be conducted to evaluate the operational and financial perspective of microfinance institutions and their products. The study aims to examine the effects of microfinance as a poverty reduction tool. The research questions to be addressed include: (a) To what extent do microfinance institutions (hereinafter referred to as “MFIs”) alleviate poverty? and (b) Do MFIs have an impact on Ghana’s financial market? The study provides solution guidelines for regulators and academia in this era of turbulent microfinance industry. A critical literature review was conducted and gaps therein established. Thus, although microfinance is seen to have a positive impact on poverty reduction, other authors refuted it, and asked for more rigorous research in this area. In this study, primary data have been collected using structured questionnaires and interviews. The primary data were directly collected from the field by administering 695 questionnaires across various sub-metros in the Greater Accra region of the Republic of Ghana. Using the stratified sampling approach, the selection procedure for Initiative Development (hereinafter referred to as “ID”) Ghana clients considered several factors and involve multiple stages. The chief limitation of the approach is that the sample may not be representative of the population if it is not carefully selected. Again, the selection process of the interviewees does not give all the population members a fair chance of being selected, due to over reliance on mobile bankers and a small group to identify the target interviewees. Three different data analysis tool were employed. One, Structural equation modeling is preferred by the researcher because it estimates the multiple and interrelated dependence in a single analysis. In this analysis, two types of variables are used, endogenous (dependent) variables and exogenous (Independent) variables. Two, analysis of variance (hereinafter referred to as “ANOVA”) is also used because it enables the researcher to see how effective microfinance products are used to alleviate or reduce poverty. The ANOVA is also able to tell if another intervention can do the same task in a shorter period, whilst costing less in reducing poverty in less privileged communities. Three, simple statistical analysis is also used and the results presented in tables, charts and graphs. The purpose is to summarize data and give an immediate “picture” of the data. From the data analysis, it was observed that economic independence had a positively insignificant effect on poverty Reduction (β = -0.124, p = .343), hence H1 was not supported. Housing and shelter had a positively significant effect on poverty reduction (β= 0.436, p = .000); whilst asset ownership had a positively significant effect on poverty reduction (β = 0.556, p = .001). Furthermore, food & nutrition had a positively significant effect on poverty reduction (β = 0.422, p = .004); whist health & hygiene had a positively significant effect on poverty reduction (β = 0.386, p = .000). Lastly, asset ownership had a positively significant effect on economic independence (β = 0.626, p = .000). Based on the evidence we accept H2, H3, H4, H5, H6 respectively, which are supported by the model and reject H1 as it is not supported by the model. Turning to the ANOVA results, it was observed that microfinance institutions, to some extent help alleviate poverty among women traders. This is evident from the fact that the revenue of participants who took loans, appears to improve post loan. That is to say that, their actual mean performance exceeded the expected results by one percent (1%). In a plain language, the post loan revenue improved by 80%.
The findings of this study have several implications for the academia, microfinance institutions and the policymakers. For academia, this study added new evidence regarding the impact of microfinance on the socioeconomic development of low income households, especially women who cannot access financial services due to their poverty. Thus, it helps theses households to diversify their income and thereby alleviate their poverty. In a nutshell, this study provides an insight into the role of microfinance on women empowerment in the urban and rural parts of a developing country. In the context of Ghana, given the peculiar status of women in the society, coupled with the emerging economic uncertainty in the family system, it has become imperative for them to undertake a venture or economic activities that could stabilize the uncertainties. Prominent among the vast range of sources of capital is the microfinance products. The microfinance provide women with a relative economic stability through employment generation, creates gender parity through empowerment and assets accumulation. It further provides women with the capacity to educate their children and cater for their health needs as well.
In a similar vein, this study suggests that microfinance has the ability to contribute significantly to the achievement of a new economic policy (NEP) and a new economic model (NEM) that guide the achievement of the Ghana Agenda for Job Creation and Poverty Reduction Strategy, through a comprehensive social intervention in the wake of Nation Builders Corp (NABCO), Stimulus Packages; One District One Factory, One Million per Constituency, Entrepreneurial Development Fund and Zongo Development Fund. It does so, through enhancing the socioeconomic wellbeing of poor and low income people especially women. It also plays a central role in creating jobs for women especially those with low education. Therefore, microfinance opens an opportunity for,women borrowers to play significant role in a national economic development.
Subject
Doctor of Philosophy (PhD) Business Administration
Publisher
Ghana Technology University Library
Date
June 2018