Microfinance and poverty issues: the theory and practice on institutional sustainability.

Abstract

The microfinance industry in Ghana started to grow but over the last few years it has declined sharply which has affected severely the lives of beneficiaries even though a study by Afrane (2002) had shown the economic, social and spiritual lives of the beneficiaries of microfinance in Ghana and South Africa . Access to financial services is very important for poor people because the poor is always living in the society . This research assesses the opinion of thirty –two microfinance professionals who served the poor with Microfinance products through questionnaire. In addition, the research uses secondary data through archival sources from Ghana Microfinance Network(GHAMFIN). The results indicate that all microfinance firms experienced high degree of risks before collapsing. This caused high level of absurd poverty of over 40% in Ghana. The promise of reaching the poor was the main reason some of the microfinance firms survived because the existing models show significance weaknesses. Based on these results, the research recommends that increase access to basic needs of life in addition to developing a strong human resource base to enable the poor identify and take advantage of opportunities will create conditions that will encourage the development of new ideas. The use of simple innovation and reasonably less costly methods of goods and services for production will also enable the poor to be employed so that girls and women will be adequately considered in all actions and programmes. The research concludes that the original models of microfinance lending have been adapted in a variety of ways and must be supervised with strong policy formulation to ensure their effective use and sustainability.