The Role of microfinance in poverty reduction: evidence from Ghana

Purpose: After the success of Grameen Bank and other microfinance institutions world wide in the recent years, the role of microfinance institutions as a potential policy in poverty reduction has continued to increase. This study intends to add to the literature in the area by assessing the impact of microfinance schemes on both new and old clients. Originality: The study has collected data from clients of Sinapi Aba Trust (SAT), a microfinance scheme in Ghana from July to September 2009 for analysis. Key Literature: Empirical evidence from the existing research show both positive and negative impact made by some of these microfinance schemes. Methodology: Respondents were sampled randomly from clients of SAT during community meetings for interviews and analysis using structured questionnaire. Findings: Preliminary results show that clients have adopted ways of managing their income to smooth consumption and to meet other unforeseen events. One way of ensuring regular income to smooth consumption is doing more than one work. The data also show that clients have adopted at least three types of savings to meet challenges in life. Research Limitations: The study uses cross section data for analysis instead of panel data which is preferred in impact studies. However, time and resources limit obtaining panel data. Practical and Social Implications: The outcome of the study is expected to help in policy direction in poverty reduction.