IMPACT OF MICROFINANCE ON SMALL AND MEDIUM SCALE ENTERPRISE DEVELOPMENT AND IMPROVEMENT IN HOUSEHOLD WELFARE: EVIDENCE FROM THE KASSENA-NANKANA MUNICIPALITY IN NORTHERN GHANA

Abstract

this study examined the impact of microfinance on SME development and household welfare in the Kassena-Nankana Municipality in Northern Ghana. Using structured questionnaires, the study compared SMEs that accessed microfinance and SMEs that do not access microfinance for business operations with respect to savings culture, employment generation, increased incomes, improvement in household welfare and poverty reduction. The study established that access to microfinance impacts positively on SME development and household welfare. Access to microfinance increases the monthly average incomes of firms to GH¢900 and above, generates about 78.75% of employment, increases clients' savings by about 94% and enables them gain market access by 68.75%. It is also established that households of microfinance clients are able to increase their consumption and expenditure on foodstuff and balanced diets leading to improved nutrition and healthy lifestyles as well as improve upon the educational status of household members. Access to microfinance does not only enhance women's participation in economic decision-making at the household and community level, but also contributes to gender equality and the promotion of sustainable livelihoods and better working conditions for women because 81.25% of SMEs owners with access to microfinance are women. However, high interest rates, inadequate finance and limited power (electricity), amongst others, are the major challenges SMEs face in their business operations. It is therefore, recommended .that government should create the enabling environment for microfinance institutions, non-governmental organizations (NGOs) and other stakeholders interested in the microfinance industry expand the outreach of microfinance services to as many SMEs as possible .. Finally, government should also ensure adequate and constant supply of power (electricity) to enable SMEs increase their production at reasonably low costs