The effect of Microfinance Institutions on the growth of small businesses in Kumasi, Ashanti Region of Ghana

Emmanuel Mintah, Kingsford Justice Attefah and Francis Kofi Amoako-Agyeman Amoako-Agyeman

MPRA Paper from University Library of Munich, Germany

Abstract: The influx of Microfinance institutions in Ashanti Region of Ghana over the past two decades and their importance to small businesses has attracted heated debate. This study reports on the effect of microfinance Institutions (MFIs) on the growth of Small Businesses(SBs). The main data collection instruments were questionnaires and interview. Twenty(20) Microfinance institutions and two hundred (200) Small Businesses respectively were sampled for the study. The study assessed the services Microfinance Institutions render to Small Businesses, how SBs manage and utilize MFI credits, and the challenges both face in dealing with each other. The study revealed that MFIs provide loans to businesses and create enabling environment to save. The study further showed that SBs use greater portion of their profit to service the loan due to high interest rate and short repayment period. The study therefore recommends that MFIs should give flexible terms of repayment of loan to enable SBs raise the capital needed. The government should provide funds to SBs at no or reduced borrowing cost. It is also recommended that Microfinance Institutions initiate insurance schemes for SBs. SBs should keep proper financial records to enable them measure the growth of their businesses using profitability ratios. Finally SBs should fully implement the advices MFIs offer to them to promote their business growth.

Keywords: Microfinance; Small business; Growth and development; paradigm shift; impact analysis (search for similar items in EconPapers)
JEL-codes: M1 (search for similar items in EconPapers)
Date: 2014-06-15
New Economics Papers: this item is included in nep-afr and nep-mfd
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Citations: View citations in EconPapers (2)

Published in International Journal of Economics, Commerce and Management Issue 6.Vol.II(2014): pp. 1-68

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