IDEAS home Printed from
   My bibliography  Save this paper

Targeting the Poor versus Financial Sustainability and External Funding: Evidence of Microfinance Institutions in Ghana


  • Samuel Kobina Annim


The creeping effect of financial crisis and economic turmoil on African economies potentially questions the sustainability of microfinance institutions, in view of the heavy investment received both from development partners and government. This study tests the hypotheses that: (i) interacting own-mobilised funds with formal institutions, microfinance organisations reach less poor clients; and (ii) concentrating on the achievement of financial sustainability causes an institution to target non-poor clients. Using data from Ghana, we revisit the microfinance argument of serving poorer clients on a commercial basis, and control for the effect of source of funds and type of institution. Unlike financial self-sufficiency, operational self-sufficiency appeared to facilitate the reaching of poorer clients. The study upholds sceptics’ view of a trade-off. Categorising institutions based on source of funds, this study adds to knowledge on the future of microfinance. Formal institutions dispensing their own funds appeared to target less poor clients. Using instrumental variable estimation, plausible problems of endogeneity emerging via measurement error were observed. We instrument financial and operational self-sufficiency with density of microfinance institutions in a given location and the group-lending mechanism to resolve attenuation bias. This finding alludes to complementary development strategies and a deliberate harmonisation of microfinance intervention, irrespective of the source of funds.

Suggested Citation

  • Samuel Kobina Annim, 2009. "Targeting the Poor versus Financial Sustainability and External Funding: Evidence of Microfinance Institutions in Ghana," Brooks World Poverty Institute Working Paper Series 8809, BWPI, The University of Manchester.
  • Handle: RePEc:bwp:bwppap:8809

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Stijn Claessens, 2006. "Access to Financial Services: A Review of the Issues and Public Policy Objectives," World Bank Research Observer, World Bank Group, vol. 21(2), pages 207-240.
    2. Carla Henry & Manohar Sharma & Cecile Lapenu & Manfred Zeller, 2003. "Microfinance Poverty Assessment Tool," World Bank Publications, The World Bank, number 15065.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:gam:jijfss:v:6:y:2017:i:1:p:1-:d:124183 is not listed on IDEAS

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bwp:bwppap:8809. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rowena Harding). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.