Examining the Effects of Microfinance Services on Incomes and Business Capital in Ghana: The Case of Sinapi Aba Trust Beneficiaries

Abstract

Microfinance institutions operate with the underlying philosophy that providing easier access to financial services for low income earners can result in increased incomes and business capital of beneficiaries to assist in reducing income inequality. This paper sets out to examine financial intermediation theory, through microfinance services, to expound its effects on incomes of beneficiaries of Sinapi Aba Trust (SAT) microfinance institution and provides empirical evidence on how microfinance services affect the incomes and business capital of beneficiaries in Ghana. The cross sectional approach was used to collect data from 361 beneficiaries. Both quantitative and qualitative tools were used, and the findings indicate that SAT services led to improvements in beneficiaries incomes. Even though most of the SAT beneficiaries were classified under the lower middle income group, they were earning incomes higher than the national average for the lower middle income group. Beneficiaries in the manufacturing sector earned higher incomes while those from the agricultural, and food sub-sector earned the lowest. Individual loan beneficiaries had the highest incomes compared to those who obtained group loans. It was further identified that larger loan sizes led to increased incomes. The conclusion, for practitioners, is that microfinance has the potential of increasing the incomes of beneficiaries.

Keywords: Beneficiaries, business capital, incomes, microfinance, Sinapi Aba Trust.