The Effect Of Microfinance Credit Facilities On Employment Generation In Ghana

Micro-Finance Institutions(MFIs)play a pivotal role in the provision of services to the financially excluded population,particularly the poor and the informal SMEs.In spite of the anticipated and the actual role performed by the SMEs in Ghana in poverty alleviation,the industry has lately experienced nationwide collapses of some of its once vibrant institutions.Ghana has witnessed exceptional collapses of SMEs necessitating this research to unearth the effect of MFIs on the creation of employment by SMEs.This study researches into the operation of the SMEs,the amount of credits requested and the amount that is granted by Adehyeman Savings and Loans.The purposive sampling technique was used where questionnaires was used to solicit data which was analyzed and found to inform that there credit received from Adehyeman Savings and Loans had a positive impact on the creation of jobs by entrepreneurs of SMEs in the study area.The analysis reveals that employment generation is higher in enterprises with the addition of more credit to the SMEs thus creating high labor force.Therefore the sector can be viewed as having the potential to contribute substantially to reducing unemployment and boost the growth of the economy of Ghana.SMEs need credit to purchase inputs to expand production and create employment.It was concluded that entrepreneurs who had access to credit were able to expand their businesses and created more employment.Again it was inferred that credit facilities was granted to the male entrepreneurs who requested for loans for their SMEs as compared to their female counterparts.SMEs were also largely unable to access credit facilities due to the fact that they were unable to provide the required collateral in order to access the facilities.Some of the problems faced by SMEs were lack of access to credit facility due to inappropriate collaterals they provide,high interest rate on credit facilities and inefficiencies with their management.It was recommended that owners should keep a proper record of those goods that are sold on credit and find strategy of recollecting their debts,as it would prevent irregular cash flows and trade with goods that would be quickly sold and demanded by customers as well as training for the SME owners regarding to proper registration and especially the procedure that enable them access to credit.The SME owners should be encouraged to make savings their habit so that they can reduce their dependency on the micro finance institution.The financial institutions should grant loans for purpose of SMEs expansion as it has a direct effect on employment.