Assessment of the effects of microfinance on rural communities in Agona district in the central region of Ghana

Abstract

This study assesses the impact of Microfinance on Rural communities in Agona District in the Central Region of Ghana. The specific objectives of the study were to assess customers’ level of awareness of microfinance programmes in place, the effect of microfinance on poverty reduction, challenges faced by residents in acquiring loans from MFIs, constraints associated with the operation of MFIs and strategies to improve the services of MFIs. A survey was conducted and one hundred (100) customers and twenty-five (25) employees of selected microfinance institutions in Agona Districts in the Central Region of Ghana were selected using purposive sampling technique to collect primary data via questionnaires. The study revealed that the respondents did not understand the condition attached to the loan application process of the selected microfinance institutions. Again, the customers disagreed to microfinance programmes or institutions causing an increase in their personal assets aside providing them better and good standard of living thus, enhancing their quality of life. Once more, the study revealed that, difficulty in hiring and keeping well-trained staff willing to work in a rural community and high additional costs for ensuring security and managing liquidity were the most challenging issues facing MFIs in reaching the poor in rural areas. The study recommended the following to the management of the selected microfinance institutions; decrease in interest rates, increasing motivational incentives and encouraging formal and informal education