Abstract:
ABSTRACT
The microfinance movement has received enthusiasm as a poverty
alleviation tool that has the potential to become a self-sustaining industry.
However, in the 1990s, a debate emerged regarding the possibilities of achieving
this promise. While some argue that microfinance institutions (MFIs) should
reduce their dependency on donors by becoming self-sustaining to serve large
numbers of poor people, others fear that a profit-seeking approach will result in
poor clients being discarded. The debate still remains unsettled, and the aim of this
thesis is to shed light on this on-going debate by studying whether outreach and
sustainability, as measures of performance in MFIs in Ghana.
An unbalanced annual panel data of 57 microfinance institutions in Ghana
was analysed over a period of 2006-2012, using the generalised least squares
technique to estimate random effect regression model for the sustainability model
(OSS) and then an ordered logistic regression for the outreach model. The panel
data for the study collected from the Microfinance Information Exchange (MIX)
database being housed by the World Bank.
The results from the first model indicate that all the variables except cost on
loan disbursed were significant in affecting sustainability. Like expected, all the
variables followed the expected signs. For the second model except NPM, WP and
AGE (Young) all the other variables were significant. The study recommends that
MFIs should keep their debt-equity ratio and cost on loans disbursed as low as
possible to generate enough revenue to ensure sustainability without resorting to
subsidies from parent organizations or donors.
