The Impact of Microfinance on Business Revenue in the Informal Sector of Ghana: Case Study of Four Selected Districts

Abstract

The study examined the impact of microfinance on business revenue in the informal sector of Ghana. A sample of 400 respondents out of a target population of 211,085 participated from four districts: Upper Manya Krobo, Shai Osudoko, Mpohor, and Jasikan.  A total valid response rate of 99.5% (n=398) out of the sample was obtained to make generalizations. The study used structured questionnaires with the likert scale rating to acquire primary data from respondents such as Traders representing 54% of the sample, Artisans representing 30.7%, Service providers’ representing 6.8% and others in the manufacturing and production representing 8.5%. This was undertaken through a combination of purposive sampling and multi-stage sampling techniques using stratified and simple random sampling. The data was analyzed using percentages, mode, weighted average mean, Pearson correlation and regression analysis. The results showed that employing microfinance activity such as micro savings, micro loan, micro training and microinsurance, there is a statistically significant relationship between microfinance and business revenue; micro savings (r=0.612, P-value 0.000), micro loans (r=0.358, P-value 0.000), micro training (r=0.486, P-value 0.000) and micro insurance (r=0.694, P-value 0.000). Furthermore, the multiple regression analysis found a statistically significant impact of microfinance on business revenue in the informal sector of Ghana(p-value=0.000<0.05) at 5% level of significance. Therefore, we reject the null hypothesis and accept the alternative hypothesis that microfinance have a statistically significant impact on business revenue in the informal sector of Ghana.

Keywords: microfinance, informal sector, Ghana