Study on the Impact of Microfinance on Grassroot Development: Reporting Evidence from SMEs in Kwabre East District of Ashanti Region of Ghana

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Study on the Impact of Microfinance on Grassroot Development: Reporting Evidence from SMEs in Kwabre East District of Ashanti Region of Ghana

March 1, 2021 Environment and Earth Science 0

The claim that development interventions targeted at people at the grassroots are poverty alleviation focused is backed by empirical studies. Microfinance has been praised as a strong method for alleviating poverty. The impact of microfinance on grassroots development cannot be overstated because poverty alleviation is rooted in grassroots development. Microfinance is defined as the long-term provision of financial and non-financial services to the poor. Microcredit, savings, microinsurance, money transfer services, and business advisory services are examples of microfinance services. The crucial role of the SME subsector in grassroots development is also relevant in this regard. This is despite the fact that the active poor are those who run micro, small, and medium businesses at the grassroots level. The impact of microfinance on grassroots development was investigated using SMEs in the Kwabre East District of Ghana’s Ashanti Region as a case study. Theoretical and empirical literatures were combed through. To collect data from 82 respondents, the study used a descriptive research design and a survey method. The survey was carried out through the use of structured questionnaires. Purposive and convenience sampling techniques were used as non-probability methods. The data was analysed using both qualitative and quantitative methods. The research used the Inter-American Foundation’s development evaluation framework to assess the impact of projects. Microfinance has been shown to have some impact on grassroots development as a development intervention. Individual SMEs and their families will benefit directly from the impact. Positive effects on basic needs, knowledge and skills, employment and income, and assets were among them. Self-esteem, creativity, and critical reflection were also positive effects of microfinance on SMEs in terms of grassroots development. However, the survey’s findings are silent on the effect of microfinance on strengthening organisations and having a broader impact on society at the local, regional, and national levels, as needed by the Inter-American Foundation’s Grassroots Development Framework (GDF) for measuring the impact of development interventions. As a result, the researcher suggests that more research be done on the impact of microfinance on organisations and society in terms of organisational capacity and culture, policy environment, and community norms. Microcredit was also revealed to be the most important aspect of microfinance in terms of making a significant impact. The credit access barrier for SMEs has not been completely removed. Microfinance, according to more than 60% of respondents, has not increased their business capital or stock levels. The researcher makes broad recommendations for SMEs’ access to credit and the strengthening of Microfinance Institutions in order to make them more resilient in financial intermediation and non-financial services provision.

Author (s) Details

Edward Yeboah
Department of Accounting and Finance, KNUST School of Business, Kwame Nkrumah University of Science and Technology (KNUST), Kumasi, Ghana.

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