Microfinance, Rural Non-farm Activities and Welfare Linkages in Ghana: Assessing Beneficiaries’ Perspectives

Abstract

This paper addresses how microfinance influences the welfare of rural inhabitants engaged in non-farm activities as their sources of livelihood. A survey was conducted to obtain data from 100 rural non-farm clients. Using a multiple regression technique, the impact of microfinance on the socio-economic welfare of clients has been discussed. Income was used as a proxy of the economic well-being of clients. Chi-square test was also run to further verify the association between beneficiaries’ income levels and microloans. In addition, data were collected on healthcare, clothing, housing, and respondents’ educational attainments as means for verification of the impact microfinance has on the social welfare of people engaged in non-farm activities. As regards the relationship between microfinance and social welfare of the beneficiaries, we found a positive impact of microfinance on the respondents’ clothing, healthcare, and educational attainments. However, microloans do not significantly support clients financially to improve their non-farm activities to the extent that could enable them to build, buy, or rehabilitate their own houses. Non-farm clients witnessed an increase in income after acquiring loans; however, income earned is usually insufficient for the acquisition of fixed assets. It is therefore recommended that microfinance institutions sensitize non-farm clients on how to generate income from diverse non-farm activities to support their socio-economic well-being.