Microfinance Impact on Microbusiness Development in Africa

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.