Creating Opportunities for the Rural Poor through Micro-Finance Programmes in Ghana: A Performance Appraisal

Abstract

Ghana features a rather predominantly rural agrarian economy with 60 percent of its labour force engaged in agriculture. The government of Ghana has been thoughtful in bringing forth rural micro-finance schemes in support of the poor rural communities. These credit programmes allow for even the very poor who have reasonable frontier economic resources but are handicapped by low skills, poor basic economic infrastructure, lack of social capital and absence of financial institutions to be up and doing. Micro-finance constitutes an innovative savings and credit delivery mechanism. lt emerged as a res ult of the inadequate safety net for the vulnerable segments of society. Micro-finance and poverty reduction strategies are therefore intricately related since the former has the potential of linking the formal banking system with the poor through savings mobilisation and the promotion of entrepreneurship endeavours. In Ghana, the banks have been hesitant to enter into micro finance because of the eminent risks of dealing with the poor. There is, however, ample empirical evidence that micro-finance is profitable with the banks if their profit centred approaches are complemented with customer friendly savings and loan products. The Poverty Alleviation Fund and Women Development Fund Micro-finance Programmes are two of the State Sponsored Microfinance Programrnes (S SMFPs) that have since the operationalization of the Ghana Poverty