Is microfinance really helping the most vulnerable? An empirical test of the effectiveness of the Ghana’s Microfinance Policy Reform

ABSTRACT

The study aims to test the effectiveness of the Ghana Microfinance Policy of 2006 set up to support women and youth through access to credit. Our results show that, after controlling for a large number of variables, female and young entrepreneurs are less likely to be rationed in the access to microcredit and that this is largely determined by the differential treatment that they receive from microfinance institutions. Our analysis using regression decomposition techniques indicates that positive discrimination in favour of women and youth exists. Surprisingly, our results show that government microfinance policy accounts for the most severe rationing behaviour towards the targeted groups by the law.

KEYWORDS:

• Microfinance
• Ghana
• Credit Rationing
• Women
• Youth

JEL CLASSIFICATION:

• D14, G18

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Al-Shami, Razali, and Rashid (2018) find that the access to microcredit affects positively monthly income of women in Malaysia.

² The interest rates vary not across individuals but across MFIs.

³ See Blinder (Blinder 1973) and Oaxaca (1973).

Additional information

Funding

The work was supported by the Spanish Ministry of Science and Innovation [RTI2018-094733-B-I00].