Access to Microfinance by Rural Women: Implications for Poverty Reduction in Rural Households in Ghana

Abstract

In view of the recent evidence that the impact of microfinance is being overstated, this study assesses the causal link between receiving credit from a microfinance institution and poverty reduction among rural households in the Upper East Region of Ghana. Using consumption expenditure as the outcome variable, we test the hypothesis that receiving credit has a poverty reducing effect. Treatment effect estimation technique is used to examine data on 250 beneficiaries and 250 non-beneficiaries from five Districts in the Region. Although the method of study is based on a quasi-experimental approach, the process of selecting the beneficiary and non-beneficiary sample cautiously made an attempt to minimize the potential problems that will arise from contamination, spill-over effects and programme and self-exclusion selection biases. The results support the hypothesis that microfinance has 0.12% poverty reducing effect. Premised on this, we conclude that even in very poor areas microfinance is capable of reducing poverty. Therefore microfinance investment is recommended to broaden the scale and scope of beneficiaries reached and improve delivery strategies to suite context specific characteristics.