THE IMPACT OF MICROFINANCE INSTITUTIONS ON THE DEVELOPMENT OF SMALL AND MICRO ENTERPRISES IN THE TAMALE METROPOLIS

Abstract

Microfinance is a term used by many in different domains to fight poverty. Poverty is a syndrome that is affecting the developing countries and especially in sub Saharan Africa. This thesis is focused on three specific objectives: The first of them is to investigate whether MFIs help their clients and/or customers in developing small or medium size businesses. The second aim is to find out whether SMEs can secure micro-financing with ease and on reasonable terms. Finally, this thesis is to determine the challenges SMEs face in their relationship with MFIs together with the evaluation of non-financial services offered by MFIs to their clients. In other to accomplish the task, we had to gather data from primary and secondary sources in areas within the Tamale metropolis. The primary data were gathered from questionnaires and interviews. The population was drawn from two different groups; the management and staff of Bonzali Rural Bank Ltd, representing the Microfinance Institutions (MFIs) and some selected SMEs in Tamale. We made used of closed and open ended questions. The responses were analyzed using SPSS software to produce percentage frequency tables. From the information that we have, it is realized that MFIs has a positive impact on the development of their clients businesses. Microfinance Institutions (MFIs) provide their members with financial and social intermediation services to help improve their businesses. Securing micro-financing by SMEs is determined by the stage or level of development in which the business is. Businesses that are viewed as growing had it easy to get a loan. But the main criteria used were the ability to pay back and to meet the set requirements to obtain a loan. Another requirement for accessing a loan from the MFls is fixed tangible assets such as land being used as a guarantee. We noticed that the poorest of the poor were not included in designing and implementing their policies. The entry requirements are difficult for the poorest to meet thus they do not enjoy the services ofMFls. We can say that the poorest are those who are not involve in any income generating activities, but lack basic amenities that are essential for life.