The Informal Economy and Microfinance in Kumasi

Abstract

The growing visibility of informal activities in urban centres is one of the striking phenomena characterizing the space economy of cities of the developing world including Kumasi in Ghana. Closely associated with this phenomenon is the emergence of a variety of Microfinance Institutions (MFIs) responding to the financial needs of these micro and small informal operators who are unable to access the formal financial market. Through innovative product development, these microfinance institutions render very useful financial services to the informal sector as a result of the increased demand for their services. With time the operations of these MFIs have shown that the answer to the issues of under-employment, lowproductivity, extreme poverty and other challenges confronting the informal sector lies in making financial services, particularly credit, available to the operators in the sector. This chapter examines the dynamic relationships between the informal economy and the delivery of microfinance services by MFIs operating in Kumasi. It further examines the size and growth of the interactions, key players in the transactions as well as the challenges and how they could be remedied through appropriate policy interventions.