Microfinance as a tool for Small Business Growth in Urban Ghana

Abstract

Microfinance provides a great potential to support economic activities of small businesses in Ghana. This study examined the impact of microfinance on the growth of small businesses in urban Ghana. It used responses to structured and unstructured questionnaire elicited from a cluster sampling of 213 clients from 58 microfinance institutions (MFIs) in the Ashanti and Greater Accra regions, the two most urbanized regions of Ghana. Simple and logistic regression analyses showed that the increase in business stock, profits and business assets after the acquisition of microfinance loans were statistically significant, indicating that the loan amount had significant impact on stock adjustments, profit levels and acquisition of business assets. However, the change in employment was statistically insignificant, indicative of the type of clients MFIs normally deal with. The study found that most of the clients of MFIs use family members to assist in the running of their businesses hence the insignificant impact of loans on employment. The study recommends the development of appropriate loan products and services that meet the needs of small business operators to sustain and enhance the growth of their businesses.