MAKING MICROFINANCE WORK FOR THE POOR: EXPERIENCES OF WOMEN SLUM DWELLERS IN GHANA

Abstract

Purpose: Microcredit has become a major tool for poverty alleviation. It may come in the form of either an individual loan granted to individual businesses or as a group loan granted to beneficiaries as a group. This research focuses on the factors that make group loans effective in its application and most importantly to enable the repayment of both loan and interest within the agreed timeframe for repayment Methodology: The research employed a descriptive survey design. The entire population was more than 10,000 and therefore can be regarded as infinite population. In order to locate the beneficiaries a list was obtained from microfinance organizations operating in the slum communities under study. There are 200 groups, 120 from New Takoradi and 80 from Kojokrom. Systematic sampling was conducted where every 24th group was selected from the 120 groups in New Takoradi and every 16th group from Kojokrom. This yielded 5 groups from New Takoradi and 5 groups from Kojokrom. the researcher presented verbatim quotes in order to ensure that the the main thrust of the respondents comments and the issues raised were not missed out. The interpretations of the respondents comments and views were guided by the theoretical positions of the research in order to limit researcher bias. Findings: the study found that the incorporation of mandatory financial literacy training programs as part of the loan application and granting process contributed to the effective application of loans by beneficiaries increased their productivity and thus enabled the timely repayment of loan and interest. The study also found that the principle of joint liability group lending and the timing of loan disbursement are also factors that can account for why group loans are effective. Unique contribution to theory, practice and policy: The study recommends that to sustain poverty reduction requires action and policies that will improve both the productive and the human capital of the poor. Policy interventions must be well targeted if the benefits are to reach the poor. To achieve this, group-based lending which minimizes problem of repayment must be adopted by both formal and informal lending institutions.