The Influence of Microfinance on the Livelihood of Women: A Case Study of Mallam (Ga South Municipality), Ghana

Microfinance, is viewed the world over as a useful tool for addressing poverty by governments, development agencies and stakeholders. Mallam, a community located within the Ga South Municipality is one such locality that believes that microfinance is a tool that can be utilized to eradicate poverty, owing to the number of microfinance institutions (MFIs) found there. Microfinance interventions in Mallam range from formal to informal finance schemes i.e. group loans, individual loans, money lending etc. Over the years, there has been a growing need to tap into the market of the unbanked, poor people that are willing to borrow small amounts of money that would eventually uplift their standards of living. Advocates of microfinance have pointed out that even the poor are credit worthy and should be given the opportunity that most traditional banks have denied them. Surprisingly, some commercial banks have observed that there‟s a growing inclination towards microfinance by many Small-Medium Enterprises (SMEs), and have opted to open up subsidiaries that would target SMEs by providing them with microfinance products. An example of such a commercial bank is that of Ecobank, that has opened EB Accion in collaboration with Accion International to provide microfinance to SMEs. Initially, microfinance was seen by many stakeholders – government, civil society and donor community as a tool to get people out of poverty. But due to emphasis on sustainability, many MFIs have opted only to lend to the “entrepreneurial” – people with basic business and management skills with operational economic ventures. This is especially the case for MFIs that are registered firms with the main aim of profit maximization. Therefore, it is seen as a waste of resources to lend to a poor person who has no means to repay the loan. Critics of this trend argue that microfinance was initially meant to target the poor of the poorest in the most remote areas of the world, while advocates argue that the cost of lending to the poor is high and they have to only lend to poor people that are able to meet their criteria, and successfully payback the loans inclusive of interest charges. The conceptual framework in this paper was adopted from the sustainable livelihood framework, developed by Department for International Development – DfID. Furthermore, a quasi-experiment was used as it enabled the researcher to compare the livelihood outcomes of non-beneficiaries of microfinance to that of beneficiaries of microfinance. Group lending was the focal point of the paper as it targets the very poor of society who otherwise may not have the means to borrow individually. Moreover, descriptive statistics, chi square and logit regression were employed in order to identify the relationship between variables that may affect the livelihood of a woman resident in Mallam. Factors identified by the researcher that were examined included, average income, average expenditure, quality of dwelling type, household sizes and general health status of the household. These variables were adopted from the Sustainable Livelihood Framework and the Microfinance Poverty Assessment Tool – MPAT. The underlying reason for embarking on this topic was to ascertain if access to microfinance had ripple effects that will ultimately lead to an improved livelihood outcome. Results of the logit model, while controlling for dwelling type, education of respondent, income, acquisition of household assets indicates microfinance has a significant influence on clients as compared to non-clients. The information in this report provides planners and policy makers with the vital basis that will help them in designing appropriate policies for the microfinance sector in Ghana. Planners and policy makers in this regard include the Bank of Ghana, Ministry of Finance and Economic Planning just to mention a few. This study will therefore probe issues that have an influence on the livelihood outcomes of women and offer possible policy recommendations to remedy the situation.