Do Multiple Loans from Microfinance Institutions Help the Rural Poor Women? Empirical Evidence from Ghana

Abstract

The theory on microfinance reveals that continued access to credit and the process of increased investment increases income further thereby enabling the borrower to gradually climb out of poverty. In consonance with this, the main objective of this study was to verify if multiple loans from microfinance institutions help the rural poor women in the Upper East Region of Ghana to reduce household poverty, using treatment effect method of estimation. In pursuance of this, data was collected from 500 women engaged in agro-processing of whom 250 were beneficiaries of multiple loans and 250 non-beneficiaries.

The results showed that respondents from the Bawku West district were less likely to receive multiple loans than their counterparts from the Bongo, Builsa and Talensi-Nabdan districts. Also respondents with post secondary education were less likely to receive multiple loans than those with no formal education. Again, respondents who received loans at least three and four times, had higher weekly consumption expenditure on basic needs than those who received loans at most two and three times respectively. The results further showed spatial differences in consumption expenditures with Kasena Nankana and Bawku West districts spending more on basic needs per week than respondents from Bongo, Talensi-Nabdan and the Builsa districts. An increase in the number of dependents also increases weekly consumption expenditure.

By implication, multiple loans from microfinance institutions contribute positively to reducing household poverty among rural women engaged in agro-processing in the Upper East Region.  

In the light of this, it is recommended that microfinance institutions should lend out to clients as many times as possible in the Upper East Region as long as these clients are able to repay since it has a positive impact on poverty reduction.