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GROUP MEMBERS

1. GIFTY WIREDU 2. JENNIFER OKYERE-AGYAPONG 3. RAPHAEL JACKSON ALORWU 4. PAULINE TOGOBO 5. OPPONG GRANT AUGUSTINE

PG8207612 PG8196512 PG8227912 PG8205712 PG8264312

INTRODUCTION 1.1 Background to the study In the Western World, capitalism and free markets are seen as the chief engines of development, and indeed, these systems have generated tremendous social and economic growth, and prosperity, which in turn, has powered a general increase in standards of living. This improvement in standards of living, is in many ways fuelled by an entrepreneurial spirit that strives to transform ideas into economic, social and/or environmental value. But in this same world of abundance, almost half of the worlds 21 billion people live on $2 a day or less and the number living on less than one dollar has increased over the past 15 years (World Bank, 2000). Almost one-third of the worlds population suffers under-nutrition due to insufficient intake of calories, protein or critical micronutrients. In Africa, over the last two decades, Ghana specifically has made important strides in her developmental efforts. Among the initiatives taken are economic reforms such as the Economic Recovery Program (ERP) of 1983, the Structural Adjustment Programme of 1986, the Vision 2020, the Highly Indebted Poor Countries (HIPC) initiative of 2002-2003 and the Growth and Poverty Reduction Strategies I and II. In line with her objectives of creating an enabling environment for private sector investment and achieving a higher middle income status by 2015, the Government of Ghana has identified the private sector as the engine of growth and microfinance as a strategy for wealth creation and poverty reduction.

1.2 Statement of the problem Microfinance encompasses the provision of financial services and the management of small amounts of money through a range of products and a system of intermediary functions that are targeted at low income clients. Microfinance refers to provision of small loans and other facilities like savings, insurance, transfer services to poor low-income household and microenterprises. The concept of microfinance is not new in Ghana. Traditionally, people have saved with and taken small loans from individuals and groups within the context of self-help to start businesses or farming ventures. It therefore not doubtful that microfinance in its various forms has been with Ghanaian for a very long time, especially the people of the Brong Ahafo Region of Ghana, and specifically the clients of Abosomankotere Cooperative Credit Union-Techiman and First National Savings & Loans-Sunyani. Considering the fact that Microfinance has been with us and in the Region for a very long time, the question that arose is that why are the people of the region still so poor and are under developed. this research seeks to provide answers to the above question by investigating how the Microfinance Institutions mentioned above are conducting their business on one hand, and on the other hand investigate how their business is helping to develop their Clients and the community as a whole.

1.3 Objectives of the study. The aim objectives of the research is to assess micro financing as a business and a development agent in the banking industry in Ghana. Specifically, the study aims, among other things, to achieve the following objectives in Abosomankotere Cooperative Credit UnionTechiman and First National Savings & Loans-Sunyani: To assess their Micro financing plan or program. To find out their yearly target for Microfinance support activities. To evaluate their Microfinance implementation strategy and its impact. To suggest recommendation on how to improve their Microfinance plan and its implementation.

1.4 Research Question The study will seek to find answers to the following questions: Do the selected institutions have any micro financing plan or program? To what extent does the microfinance strategy of the selected institutions impact on socio-economic development of the communities in which they operate? How often do the selected institutions support micro financing activities of the people in the communities in which they operate? What is the contribution of the selected institutions to the development of the people and

the community as a whole?

1.5 Literature Review Microfinance, according to Otero (1999) is the provision of financial services to low-income poor and very poor self-employed people. These financial services according to Ledgerwood (1999) generally include savings and credit but can also include other financial services such as insurance and payment services. The main goal of Ghanas Growth and Poverty Reduction Strategy (GPRS II) is to ensure sustainable equitable growth, accelerated poverty reduction and the protection of the vulnerable and excluded within a decentralized, democratic environment. The intention is to eliminate widespread poverty and growing income inequality, especially among the productive poor who constitute the majority of the working population. According to the 2000 Population and Housing Census, 80% of the working population is found in the private informal sector. This group is characterized by lack of access to credit, which constrains the development and growth of that sector of the economy. The observation was stressed in the International Monetary Fund Country report on Ghana of May 2003 that weaknesses in the financial sector that restrict financing opportunities for productive private investment are a particular impediment to business expansion in Ghana. Microfinance perceived as a financially sustainable instrument meant to reach significant number of poor people of which most are not able to access financial services because of the lack of strong retailing financial intermediaries. Access to financial services is imperative for the development of the informal sector and also helps to mop up excess liquidity through savings that can be made available as investment capital for national development (World Bank- Africa

Region, 1999). Microfinance as a sector has the potential to reduce poverty by bringing a significant improvement in the lives of the active poor who are largely women. In Ghana, the clients of microfinance are predominantly women in both rural and urban centers. These women are engaged in activities such as farming, food processing, petty trading, service provision and street vending. 1.6 Data Collection Method The main data collection instruments to use for the study are questionnaire administration ,interview schedules with a selected sample population and key management officials in the selected institutions and focus group discussions. These will be done to assess the impact of micro financing as a business and a development agent to the people and the communities in which the selected institutions operate.

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