Outreach and the poverty-reducing effect of microfinance in Ghana

Abstract

This study is premised on two sequential objectives: examination of the outreach dimensions of microfinance institutions (MFIs), and an investigation of the poverty-reducing effect of access to MFIs and the amount loaned to MFI clients. Using a nationally representative sample of 2,884 respondents comprising MFI client and non-client households from Ghana, descriptive statistics and two variants of microeconometric estimation technique are employed. Outreach dimensions varied across MFIs, with targeting of MFIs remaining about the same in 2004 and 2015. Microfinance intervention was observed to have had poverty-reducing effects at the household level. The findings establish that clients of MFIs in the rural areas are more sensitive to larger loan amounts compared to their counterparts in the urban areas. These findings seem to uphold the promise of poverty reduction, but with consideration of the differential effects in terms of outreach, location of the MFI, and loan amount.