Abstract
This chapter applies the control group experiment to study whether microfinance improved microbusiness growth in Ghana. According to this approach, statistically significant difference in the outcome between treatment and control groups is an indication of impact of the microcredit on microbusiness development. Thus, this chapter compares the mean monthly sales, number of employees, business assets, and capital stock of microbusinesses that received microfinance (the treatment group) and the mean monthly sales, number of employees, business assets, and capital stock of microbusinesses that did not receive microfinance (the non-treatment group) in seven municipalities identified by various non-governmental organisations as areas of financial exclusion in the Northern Region of Ghana using survey data. Results indicate that microfinance impacted positively on microbusiness development. These findings have policy implications for the government of Ghana and agencies that are interested in using microfinance as a catalyst for economic growth in deprived communities in other countries.
TopBackground
Several scholars (Chowdhury, 2009; Hermes, et al., 2011; Van Rooyen, et al., 2012) regard microfinance, as a significant intervention for reducing poverty and achieving financial inclusion in both developed and developing countries. Nonetheless, what precisely is microfinance? Luo & Rahman (2010) define microfinance as the provision of finance and related services to financially disadvantaged individuals who are unable to access such services from banks and other orthodox financial institutions. Similarly, Mayoux and Hartl (2009) define microfinance as all financial products that are available to low-income earners and financially disadvantaged individuals and rural households. In addition to the above definitions, Babajide (2011) added microbusinesses to the clients of microfinance institutions. He defines microfinance as a variety of monetary services provided exclusively to microbusinesses, financially disadvantaged individuals and low-income families.
Key Terms in this Chapter
Microcredit: The provision of small loans to low-income earners to set up or develop their existing businesses.
Experiment: A procedure designed to test the effect of microfinance services received by the microbusiness studies.
Microfinance: The provision of small loans and training exclusively to microbusinesses, financially disadvantaged individuals, and low-income families.
Assets: Resource owned by a business that have significant financial value.
Development: Improvement in the performance of microbusiness such as increased amount of capital, sales, assets, and number of people employed.
Capital: Any resources both tangible and intangible that confers value or benefit to a business organisation.
Impact: The effects of the provision of microfinance.
Microbusiness: Any business organisation that directly employs fewer than ten employees.