Microfinance Impacts And SME’S: Evidence From Ayawaso West Municipality, Ghana.

International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue I, January 2022 | ISSN 2454–6186

Microfinance Impacts And SME’S: Evidence From Ayawaso West Municipality, Ghana.

Daniel Bamfo
School of Graduate Studies, Valley View University, Accra, Ghana

Abstract
SMEs’ contribute to the Gross Domestic Product of Ghana through employment creation and paying of revenue .SMEs’ contributions in terms of employing people in their businesses make them more productive, leading to poverty reduction. Despite SMEs’ contributions to the economy’s development, obtaining funding or credit from formal financial institutions such as banks to enable their operations is a big challenging for SMEs
Microfinance institutions fill the financial gap to offer services such as credit and business training to maximize the impact of SMEs. The purpose of the research study was to assess the impact of Microfinance services on the performance of SMEs in Ayawaso West, Ghana, in terms of profitability, employment, and sales growth. A descriptive survey that employed a quantitative analysis was used for the study. A linear regressions was employed to analyse the data. The finding of the study showed microfinance services (loans and training) had a positive impact on the performance of SMEs. The study recommends that Microfinance institutions should design specific products and services such as loans and business training to make a positive impact on the performance of SMEs.
Keywords: Microfinance; Small and Medium-sized Enterprises; microfinance loans; business training

INTRODUCTION

Microfinance has gained international attention in recent years due to its importance in reducing poverty among the poor. Global microfinance is said to have begun in the nineteenth century (Kumra & Sharma, 2018). Mohammed Yunus is regarded as the forerunner of modern microfinance. In 1976, Mohammed Yunus introduced a microcredit scheme in Bangladesh which supported the poor (Kumra & Sharma, 2018).
There is evidence that microfinance contributes positively to the livelihoods of owners of SMEs by reducing poverty For instance, Schrawwat and Giri (2016) posited that microfinance contributes to poverty reduction among individual business owners in South Asia . Microfinance has been credited with job creation across the globe. Microfinance institutions’ products and services support small enterprises to create more jobs for the unemployed (Noguei et al., 2020).
Microfinance services has a favourable impact on the performance of SMEs in the Ghanaian economy. Microfinance services, including lending and savings opportunities, have played important roles in the growth of businesses in Ghana (Anaman and Pobbi (2019). In Ghana, microfinance has a good influence on SMEs and the Ghanaian economy, consequently reducing poverty (Anaman and Pobbi (2019). Microfinance activities provide job opportunities and income for the poor, thereby reducing poverty and raising their standard of living (Gupta and Gupta, 2019). Microfinance, as an alternative financing strategy for the financially disadvantaged, gives credit and managerial skills to SMEs, allowing them to engage in economic activities and produce revenue to support their families and contribute to national development.
Small scale businesses are the lifeblood of the economy of both the developed and developing nations, and have a favourable impact on a country’s GDP (Erdogan, 2019, Bashir and Ondigo, 2018). SMEs do not contribute to only economic growth; they also contribute to economic development. Undoubtedly, SMEs are key contributors to a country’s economic growth and development (2020). A substantial portion of GDP is attributed to SMEs. It has been estimated that SMEs contribute almost 70% of Ghana’s overall GDP (Ntiamoah et al., 2016).
SMEs create employment opportunities for the masses and provide avenues for raising national revenue. SMEs contribute to the nation by providing job opportunities and paying taxes (Augustine & Asiedu, 2017). Thus, SMEs’ contributions in terms of employing people in their businesses make them more productive, leading to poverty reduction. This is consistent with the statement in the Bible that states that “all hard effort produces profit, but mere chatter causes poverty” (Proverbs 14:23 NIV). God expects all humans to work to receive positive returns to take care of themselves and the community or nation. Taxation is also a source of cash to the government of Ghana, to fund national projects such as schools, hospitals, roads and many more, for the welfare of the citizens. Business enterprises such as SMEs pay taxes to support national development. This view is consistent with principle of paying of tax written in the bible, “This is why you pay taxes for the authorities are God’s servants, who give their full time to governing. Give to everyone what you owe them: if you owe taxes, pay taxes, if revenue, then revenue, if respect, then respect, if honour, then honour” (Romans 1:6-7 NIV).

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