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The Impact of Microfinance on Grassroot Development: Evidence from Smes in Kwabre East District of Ashanti Region of Ghana

DOI: 10.4236/ojbm.2017.54050, PP. 577-591

Keywords: Grassroots, Grassroots Development, Grassroots Development Framework, Microfinance, SMEs

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Abstract:

Empirical studies attest to the assertion that development interventions aimed at people at the grassroots are poverty alleviation oriented. Microfinance has been acclaimed to be effective vehicle for poverty eradication. Since poverty alleviation is rooted in grassroots development, the impact of microfinance on grassroots development cannot be gainsaid. Equally relevant in this regard is the pivotal role of the SME subsector in grassroots development. This is against the backdrop that at the grass root, the active poor are those who run enterprises known as micro, small and medium enterprises. This research looked at the impact of microfinance on grassroots development using SMEs in Kwabre East District of Ashanti Region in Ghana as the case study. Both theoretical and empirical literatures were reviewed. The study adopted the descriptive type of research and the survey method to collect data from 82 respondents. The survey was done through the administration of structured questionnaires. The sampling techniques used included the non-probability methods of purposive and convenience. Qualitative and quantitative techniques were utilized in the data analysis. The research used the development evaluation framework for impact assessment of projects pioneered by the Inter- American Foundation. It was evidenced that microfinance as a development intervention has some level of impact on grassroots development. The impact is of direct benefits to individual operators of SMEs and their families. These included positive impact on basic needs; knowledge and skills; employment and income; and assets. Other positive effects of microfinance on SMEs relative to grassroots development were self-esteem, creativity and critical reflection. However, findings from the survey are not explicit on the impact of microfinance on strengthening organizations and broader impact on society in relation to local, regional and national as demanded by the Gras-sroots Development Framework (GDF) of Inter-American Foundation for measurement of impact of development interventions. The researcher therefore recommends for further studies the effect of microfinance on organizations and society in the areas of organizational capacity and culture, policy environment and community norms. It was also revealed that microcredit remained the dominant feature of microfinance in making significant impact. The hurdle of accessibility to credit by SMEs has not been completely cleared. Over 60% of the respondents posited that microfinance has not increased their business capital and stock levels. The

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