ASSESSING THE IMPACT OF MICRO FINANCE ON THE EMPOWERMENT OF RURAL WOMEN IN THE KUMBUNGU DISTRICT OF NORTHERN REGION

ABSTRACT
Microfinance Institutions (MFIs) provide its members with various services to help improve their entrepreneurial ventures and in the end empowering them. Despite many studies carried on the topic, the effect of microfinance intervention on the empowerment of women entrepreneurs in rural constituencies remains largely unexplored in Ghana. This study sought to close the gap by establishing the effect of Micro Finance on rural women empowerment in Kumbungu District, Northern Region in Ghana. The study adopted a descriptive research design with the population consisting of all women groups in Kumbungu District, Northern Region in Ghana. The sample of the study consisted of the 80 active women groups. Primary data was gathered using structured questionnaire for analysis which was done using the Statistical Package for Social Sciences (SPSS version 19) to generate the descriptive statistics and also to generate the trends results and regression findings. Findings on the analysis of variance (ANOVA) indicate that the overall model was statistically significant as indicated by an F statistic of 4.863 and p value less than 0.04608. The regression analysis revealed that micro credit to be statistically significant with micro training and micro saving with significance of more than 5% to be not statistically significant. This study provides recommendations clear financial management strategies should be set aside to address key critical financial difficulties facing women particularly developing good financial management technique to provide adequate responses to challenges and problems by focusing on women business processes to minimize claims and enable women growth and women empowerment and have clear framework to advice women on how financial management decisions are made and the procedure to be followed to make sure the right decisions are made to meet the benefit of the customers and maintain their visibility. This will enable to minimize any conflict of interest which might ruin their image and reputation. Nevertheless, women should focus on planning issues to improve their effectiveness and efficiency. Operating activities which involves receivables, payments and savings should be well management to ensure efficiency and effectiveness to maintain steady cash flows to finance groups operating long term projects and goals.

CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The impact of microfinance on women‟s empowerment is of great interest to academicians, researchers and policy makers. Studies suggest that microcredit helps women increase their income earning abilities, leading to greater power within the household, while others argue that men often take control over the microcredit, which was allocated to women, leading to a more vulnerable position within the household for women.

Poverty is a social condition that is found in every part of the world. Yunus (2007) acknowledges that, there are different definitions of poverty depending on the region and Region. For instance, poor people from Bangladesh lead a life that is totally different from their poor counterparts in the U.S. While majority of U.S. citizens who are classified as poor do own television sets, majority of the poor people in Bangladesh do not have electricity in their homes. In Philippines, poverty refers to the lowest income below which one cannot buy goods and services considered necessary for basic survival (Gordon, 2007).

Ackerly (1995) argues that in the informal sector women‟s participation in production only is not empowering, but knowledge and empowerment come through access to the market. Women may have a higher and more stable income either as an independent entrepreneur or as an employed worker. Entrepreneurship is often problematic even with a relatively high but very irregular income. An entrepreneur can be highly dependent in practice, if she buys raw material from middlemen and sells products back to them. In situations of this kind the entrepreneur can be exploited and underpaid. However, women are usually not able to choose between waged employment and salaried employment, but they have limited options or no options at all.

Olsson (2005) defined a poor person as one who cannot afford the necessities of life including food, clothing and housing. Even though there are different definitions, they all converge at a common point. That is, poverty is that condition where low income earners cannot live a decent human life. This condition is caused by the lack of resources or capabilities to utilize existing resources in order to acquire basic needs. Causes of poverty can be classified into two categories: internal and external. Internal factors include social and environmental conditions under which a population lives in. External factors, on the other hand, include a country‟s debt burden and effects of international trade.

According to Chant (1997), women are more disadvantaged in the labor market than men because they have fewer financial resources to operate small-scale business, their skills are primarily domestic and their mobility is lower than men‟s. Still, women‟s share in the global labor force has risen. Factors affecting this are the expansion of the tertiary sector, the rising level of women‟s education and lower fertility. The size of the female work force often increases during recessions among the urban poor in consequence of the effort to maintain the level of the household income. Women participate in economic progress and in a flexible labor market in several ways: through their underemployment and unemployment, their willingness to move in and out of the labor market, and their low wages (Bruce 1989).

A study by Carter and Cannon (1992) on women has also revealed that women have problems raising start-up for business than men and that women encounter credibility problems when dealing with bankers. Similarly, the „Women Entrepreneurs‟ summit hosted by the Organization for Economic Cooperation and Development (OECD) held in 1997, accessibility to credit facilities was raised as a problem for the promotion of women entrepreneurship and business advancement. Thus, supplying credits to small and micro-enterprises is important for the reasons that: First, it has to do with market imperfection where banks do not favor lending to small enterprises. In offering credit to small enterprises, market imperfection will thus be minimized since banks will now favor lending to small enterprises especially, women in the promotion of gender equity (Mensah, 2003).

Again, they favor the development of private sector, the promotion of women and the implementation of community development by private initiative and they help to reduce poverty and contribute to a fairer income distribution. In a workshop held in Dares salaam, 1997, the participants observed that many women suffer human rights abuse because of their economic weakness. Ms Nambuo added that it is often a product of their comparative lack of educational opportunities so reinforcing their women‟s rights might include challenging traditions, ensuring that education is available, providing legal help and making business capital available (Commonwealth Report, 2001).

Increasing evidence shows that not only women are overrepresented among the poorest people but are also more likely than men to spend their incomes on the welfare of children and dependents. Therefore, poverty reduction programs which target women are likely to be more effective. Again, there is much evidence that in microfinance there is higher repayment and savings discipline among women than men. Empowering women is the second stated goal of microcredit summit campaign. There is also evidence of significant potential for microfinance to enable women to challenge and change gender inequalities at all levels. There is now the growing need to rethink the best practices to ensure that women have equal access to all types of financial services (Mayoux, 2006).

Roodman (2012) has blossomed from a humble beginning, something that started off as small experiments involving provision of financial services to poor people has now matured into a global movement. Microfinance stimulates micro enterprise, empowers women and lifts families from conditions of poverty to being self-sufficient. Microfinance stepped into the picture following the neglect of the needy people by commercial banks and other mainstream financial institutions. Many countries in Africa, Ghana included continue to suffer from poverty, illiteracy, malnourishment, ill health and hunger.

1.1.1 Micro Finance
Microfinance is a type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services, S. Sarumathi and Dr. K. Mohan (2011). Micro finance through Self Help Group (SHG) has been recognized internationally as the modern tool to combat poverty and for rural development. Micro finance is effective in reducing poverty, empowering women and creating awareness which finally results in sustainable development of the nation.

Hoff and Stiglitz (1993) show that if some borrowers can satisfy all their borrowing needs from the formal sector at lower interest rates, there will be less demand for informal credit. But in a monopolistically competitive market with free entry and one money lender as an imperfect substitute for another, a subsidy in the formal credit market may cause interest rates to rise in the informal sector because the induced new entry drives up the marginal enforcement cost of lending in the latter.

Jain and Mansuri (2003), by contrast, focus on the „crowding in‟ effect of microfinance on informal lenders. Under certain conditions, this crowding in effect may raise the interest rate in the informal sector. Based on data collected in 2002 from 156 villages in three districts in northern Bangladesh, a regression analysis was carried out of the determinants of the annual average money lender interest rates.

Borrowers can make more productive investments if MFIs meet their demands for loans by allowing more flexibility in loan disbursement and repayment schedules. A useful insight is that the presence of local moneylenders may even be beneficial, if increasing competition between formal and informal lenders increases borrowers‟ access to funds at competitive interest rates (Mallick, 2011).

The majority of Micro Finance Institutions (MFIs) lend only to women as it is believed that women are disadvantaged both sociologically as well as economically. It could be possible that women are chosen for these loans because of their non-migratory behavior or for they being perceived as more family oriented and responsible compared to their male counterparts.

Additionally since MF necessitates attendance in weekly meetings institutions trust women more than men as they are likely to be more disciplined than men. If these are the reasons for selecting women for loan disbursements, it is even more important to raise a question if providing loans to the poor women is resulting in women empowerment as suggested and followed by several microfinance institutions in their mission statements (Amarty, 1999).

The Microcredit Summit Campaign launched for achieving development goals in 2015 ensures to reach 175 million of the world‟s poorest families, especially the women of those families, with credit for self-employment and other financial and business services to lift 100 million families above the US$1 a day threshold (Harris, 2007).

1.1.2 Rural Women Empowerment
Women‟s empowerment is typically understood as social, economic or political empowerment. Social empowerment is often considered to include e.g. girls‟ education, political empowerment women‟s share of seats in national legislatures, and economic empowerment the gap between men‟s and women‟s salaries. Both political and social empowerment can be described as participation in decision-making. From the point of view of social empowerment, women‟s empowerment can mean social mobilization around their major concerns, change in their state of mind or gains in access to the bases of social power (Friedmann, 1992).

According to Kabeer (2001), it is possible to think empowerment in terms of the ability to make choices. Thus disempowerment means the lack of choice. For her, empowerment is a process where disempowered persons who have been denied the ability to make choices acquire such an ability. In this definition the process of change is underlined. In order to be empowered people have to be disempowered in the first place. A further distinction is made between strategic life choices and second-order or less consequential choices. The strategic life choices constitute the defining parameters of the quality of one‟s life. Thus empowerment is “the expansion in people‟s ability to make strategic life choices in a context where this ability was previously denied to them.

Dobra (2011) argues that while in the developmental process, speaking about development without seeking to reduce inequalities between men and women leads to both partial development and partial poverty reduction. Furthermore, the World Bank (2012) has stressed that long lasting gender inequalities, characteristic of many developing countries, are restraints one in economic growth and development. Sen (1993) explains that the freedom to lead different types of life is reflected in a person‟s capability set. A person‟s capability depends on a variety of factors including social arrangements and personal characteristics. However, the full accounting of individual freedom goes beyond the capabilities of personal living.

Poverty is widespread and remains a critical development challenge in Ghana. For this reason micro-financing come in handy in reducing poverty by bringing economic empowerment, which is the first step in reducing poverty. Accordingly, empowerment is about the improvement of individual‟s capabilities to make a difference in their settings, which in turn affects their life. Empowerment also relates to the influence of an individual on social and cultural norms in society. In contrast to many other terms, women‟s empowerment relates to a process, a movement from one state to another. Empowerment also includes agency, in which women themselves are actors in the empowerment process. Furthermore, agency implies that women must not only be able to make a decision, but be aware of their rights to make it (Kabeer, 1999).

1.1.3 Effect of Micro Finance on Women Empowerment
Many studies and different authorities have concluded that micro finance schemes embarked in many developing countries have yielded positive results (Ray, 1998). It is against this background that United Nations Capital Development Fund has been established as the channel for UNDP to fund microfinance interventions. Many micro credit programs have targeted one of the most vulnerable groups in society-women who live in households which own little or no assets by providing opportunities for self-employment.

Many studies have concluded that microfinance products have significantly improved the economic standing of the poor as well as increasing women‟s security, autonomy, self- confidence and status within households (UN report, 1998, 2000). Such studies recommend that if micro-credit is to play a strong role in development then certain requirements need to be fulfilled. The most crucial requirement is to perceive micro-credit lending as part of a comprehensive program of support to small scale enterprise sector, the consultative group to assist the poor (CGAP) estimates that the sector already employs 500 million of the poor. It constitutes an active base for strengthening the private sector in developing countries. This would entail governments of developing countries (Ghana inclusive) formulating plans and programs to support small enterprises of which microcredit should be an integral part.

Sen (1987) confirms two ways in which women‟s income-earning activities can affect the situation of a woman and her family. The first possible outcome is the enhancement of the overall command of the household, and the second is an increase in the woman‟s share of the household command. Earnings can give woman a clearer perception of her individuality and wellbeing and/or a higher perceived contribution to the economic position of the family. And vice versa, women‟s empowerment has a critical effect on their economic gains (Sebstad, 1989).

Dupas and Robinson (2009), for example, report that micro-business owners with access to a savings account, a form of commitment savings product, recorded higher business investment, a reduced sensitivity to shocks, and higher per capita expenditure selection bias). The findings are unavoidably mixed because of the use of different methodologies and data sets. A distillation is given below, based on a few important contributions. As noted earlier, we will examine a wide range of effects on poverty, women‟s empowerment, vulnerability to health shocks, short and long term welfare effects, interest rates charged by local money lenders, commercialization of microfinance, trade-offs between sustainability and outreach, and credit subsidy.

Access to finance has several potential benefits that reduce poverty. These include (i) long lasting increases in income through higher investments in income generating activities, and a more diversified livelihood; (ii) asset accumulation and consumption smoothing; (iii) reduction of vulnerability to illness, droughts, floods; (iv) empowerment of women through expansion of economic opportunities and enhancement of social status; and, (v) finally, through spillover effects that extend beyond the borrowers (Hermes and Lensink, 2011).

Morduch (2009), however, reject these findings on the grounds that the instrumentation strategy is inappropriate and important explanatory variables are omitted. Copestake et al. (2005) are also not optimistic about the impact of microfinance. Based on a survey carried out in Peru and a mix of methods (difference-in-difference and in –depth interviews), they find that it is the „better-off‟ rather than the core poor who benefit most from microfinance.

Imai et al. (2010) examine whether household access to microfinance reduces poverty, using a multidimensional welfare indicator5. Using national household data from India, the treatment effects model is employed to estimate the poverty-reducing effects of microcredit for productive purposes, such as investment in agriculture or non-farm businesses. These models take into account the endogenous binary treatment effects and sample selection bias associated with access to MFIs.

Despite some limitations, such as those arising from potential unobservable important determinants of access to MFIs, significant positive effect of MFI productive loans on the multidimensional welfare indicator is confirmed. The significance of treatment "effects" coefficients is verified by both Tobit and Propensity Score Matching models. In addition, it is found that loans for productive purposes were more important for poverty reduction in rural than in urban areas. However in urban areas, simple access to MFIs has larger average poverty reducing effects than access to loans from MFIs for productive purposes.

The effects of microfinance and/or microcredit schemes on poverty reduction are still largely unknown. Consequently, microfinance has been moving increasingly towards for-profit ventures that focus on relatively richer clientele. Though studies on broader area of microfinance have been done, no study has actually been carried out on the effects of microfinance on poverty reduction. The literature confirms that most microfinance programs do not serve the poorest (Morduch and Haley, 2002). However, the authors affirm that there are some institutions that do and the poorest can definitely benefit from microfinance in terms of increased incomes, and reduced vulnerability.

1.2 Research Problem
According to the government of Ghana, there are problems in lending to small enterprises on three levels: small borrowers lack experience with credit institutions, financial organizations are not predisposed to lending to small enterprises, and existing regulations limit the total funds available for on-lending (Government of Ghana 1992, 18). The reality on the ground indicates that the increase on the number of poor people both in rural and urban Ghana is worrying. Therefore, if poverty levels are not reduced in Ghana, then the MDG goal number 1 on 80 the eradication of poverty to less than 30% of the Ghanaians by 2015 and as envisioned in the Ghana Vision 2030 will not be achieved. This creates a need to intensify poverty reduction efforts through MFIs in planning and outreach. Recent studies show that, linking MFIs with other interventions such as poverty alleviation often complicates the functioning of MFIs by pushing them to areas not considered sustainable. Most of sustainability indicators focus on the MFI as a profitable institution (loan repayment, profitability and degree of subsidization). Thus for an MFI to meet the microfinance best practices, as given by Consultative Group to Assist the Poorest (CGAP), and be financially sustainable, it has to regard itself as a business venture.

However, globally and locally studies remains scarce in addressing the effectiveness of microfinance in poverty alleviation and empowering of women group (Adam &Pische, 1992).

Hashemi (1996) found that participation in credit programs increases women‟s mobility, their ability to make purchases and major household decisions, their ownership of productive assets, their legal and political awareness and participation in public campaigns and protests. Another study of Grameen Bank concluded that female participants in credit programs are more conscious of their rights, better able to resolve conflicts and have more control over decision making at household and community levels (Chen, 1996). However, this view is not universal. Goetze et al (1996) has concluded in spite of receiving credit, women empowerment had a long way to come.

The introduction of MFIs is seen as the best alternative source of financial services for low income earners in rural areas as a means to raise their income, hence reducing their poverty level. Tiwari (2007) stated that in order for third world countries to make progress towards eradicating poverty, they must pursue strategies whose focus is on promoting women entrepreneurship. One of these ways is by making credit accessible to rural women and where it already exists, expand its reach. Microfinance institutions have intervened to boost income generation potential among women in Ghana.

Microfinance credit has helped rural women establish new income generating ventures and supported existing ones. Schreiner (2010) says that microfinance is a very common form of savings and credit. It is said that microfinance institutions have, in a large way, helped the Ghanaian rural community development (Betty 2006). A study has been done on microfinance and women empowerment positively (Mjomba, 2011) but the opposite was left for everyone to guess.

Since early 1980s, there have been a large number of studies conducted on microfinance programs and their effect on women empowerment. However, there are few studies addressing the subject of how effective microfinance has alleviated poverty in rural parts of Ghana. In majority of these studies, emphasis has been on savings and credit products MFIs have introduced. Research appears to be heavily skewed on Microfinance success with little or no emphasis on the extent of benefits on individuals. This study sought to answer the question; what is the effect of microfinance on rural women empowerment in Kumbungu District, Northern Region in Ghana?

1.3 Research Objectives
To determine the effect of Micro Finance on rural women empowerment in Kumbungu District, Northern Region in Ghana.

1.4 Significance of the study
The result of this study is expected to benefit Microfinance in Ghana to improve the quality of their products and services to their clients and understand their shortcomings so that they can offer services which add value to clients and have a competitive advantage over their rivals.

Researchers will also find the results of the study useful; for the study will add to the existing body of knowledge and provide a source of reference to their studies. This study can be used by future academic researchers to be able to understand women empowerment and the factors that determine women empowerment.

Policy makers will stand to gain significantly from its findings in that they will have at their disposal vital information on credit financing towards the women empowerment in Ghana. Small and medium businesses are very vital to the development of Ghana‟s economy. Over 60% of Ghana‟s economy is driven by entrepreneurs and they account for 30% of the country‟s employment. Therefore the government of Ghana should put in place policies which will create an efficient and easy working environment for small and medium businesses.

1.5 Limitations for the Study
Limited time used and resource constraints, which is includes finances move from one point to another when collecting data for this study was tiresome and thus women statistics was considered and involved in this study.

Another limitation in the course of the study was the limited access to the information especially the primary data which led to the use of primary data in this study which was difficult and challenging to edit code and analyze.

The analysis multiple models involved in this study was difficult and inadequate to provide required explanation on the effects of microfinance on the women empowerment which depends on many factors from different dimensions.

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