Microfinance Interventions and Poverty Reduction among Entrepreneurs of Micro, Small and Medium Entreprises in Central Region of Ghana
Ampah, Samuel Nathaniel
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This study sought to investigate the effect of microfinance interventions on poverty reduction from the perspective of microfinance clients who are entrepreneurs of micro small and medium enterprises in the Central Region of Ghana. The Specific Objectives of the study was to establish the effect of Microsavings on poverty reduction; determine the effect of access to credit schemes on poverty reduction and to determine the moderating effect of regulatory framework on the relationship between microfinance interventions and poverty reduction in Central Region of Ghana. Five hypotheses were formulated to cover each objective and each of them was operationalized into four sub-hypotheses. The study was underpinned by the financial intermediation theory, supply leading finance theory, theory of life cycle savings and investing, the welfarist theory and the institutionalist theory. The study adopted descriptive cross sectional research design methodologies with positivism as the research philosophy. Using cluster sampling techniques, a sample of size of 370 respondents who are entrepreneurs of micro small and medium enterprises were contacted. SPSS was used to analyse the data using cross tabulations and multiple regression analysis. Tests conducted included: Cronbach Alpha (0.642) normality and linearity using Shapiro-Wilk tests, histogram and P-P plots, multicollinearity using correlation matrix, Tolerance and VIF, and Levene’s test for homogeneity of variances. In line with the study objectives, the study found that microsavings had a statistically significant effect on growth in income and acquisition of business assets. It however had a relatively weak positive effect on consumption expenditure and a moderate effect on ability to educate children as poverty indicators. Similarly, Access to credit had a statistically significant strong positive effect on ability to educate children, however access to credit had a weak positive effect on growth in income, increase in consumption expenditure and acquisition of assets as indicators of poverty. Microinsurance on the other hand had strong positive effect on growth in income, acuisition of business assets and ability to educate children. Microinsurance however had a statistically weak positive effect on increase in consumption expenditure. The study therefore concluded that microfinance interventions are effective poverty at reducting poverty in Central Region of Ghana. The moderator, Regulatory Framework had a statistically significant moderating effect on the relationship between microfinance interventions and poverty reduction and its inclusion in the model increased the predictive of growth in income and acquisition of business assets. However its predictive power on increase in consumption expenditure and ability to educate children was insignificant. Accordingly, the study recommended that: prudential regulations on non-bank financial intermediaries by strengthened for the realization of the full benefits of microfinance interventions, the Central bank should carry out frequent and thorough institutional appraisal of the microfinance industry to ensure that its policies on lending are properly implemented, funding agencies such as Masloc established to support the small scale sector should not adopt a blanket financing option for all categories of businesses but rather, policies aimed at promoting the performance and growth of micro and small enterprises should adopt a sectorial approach. The study contributes to the finance theory by explaining how the study variables account for poverty reduction and in particular helps to answers the unending debate about the role of microfinance interventions in poverty reduction. Academicians will form a basis for future studies out of the research gaps identified by this study. Limitations highlighted include the inability of descriptive cross sectional design to capture the time effect of microfinance interventions on poverty reduction, the inability to extend the research outcome to other parts of Ghana other than the study locale, lack of studies adopting similar variable for empirical comparisons. The study recommends that further studies should employ Randomised Control Trials over a longitudinal period. Additionally the study recommend more primary studies using differenent predictors such as micro leasing, microinsurance and money transfer services among others.