Expanding Rural Economies through Microfinance: Chronicling the Experience of Microcredit Clients of the Upper Manya Krobo Rural Bank of the Eastern Region of Ghana

Abstract

Micro and small enterprises constitute an important feature of the economy of many countries. They are significant to socio-economic development and serves as important sources of employment and wealth creation. However, small businesses face teething financial challenges to operate effectively and efficiently. The microfinance paradigm which emerged in the 1970s was geared at providing financial services to poor entrepreneurs to enhance their activities and social welfare. This paper assesses the contributions of the Upper Manya Krobo Rural Bank’s (UPKRB) microcredit programme to business and household outcomes. The article is based on a doctoral research output that employed mixed methods approach. It therefore used structured questionnaire, in-depth interview guide and focus group discussion guide to gather both quantitative and qualitative data. The sample size was 420 exited, repeated and permanent clients. The data was processed and analyzed using SPSS version 16 to generate descriptive results. To assess the probability of microcredit clients experiencing positive or negative business and household outcomes, STATA was used to generate probit regression models. One main finding of the paper is that, 72 percent of microcredit clients have achieved growth in financial, human, social, physical and natural assets. It also emerged that, using part of the loan for other purposes has no correlation with loan repayment difficulties. It is recommended to Microfinance Institutions of the need to consider discouraging the deduction of risk management fees from loans granted to clients since groups are jointly liable in the event of a member’s loan default.

Keywords: Economies, Microfinance, Microcredit, ManyaKrobo Bank