Monday, May 23, 2011

Book Review:Microfinance and Poverty Reduction: The Experience of Ghana

Title: Microfinance and Poverty Reduction: The Experience of Ghana

Author: Dr. Joseph Kimos Adjei

No. of pages: 211

Publisher: Bold Communications Limited

Reviewer: Ekow Essabra-Mensah

Price: GH¢ 30 (Thirty Ghana cedis only).

Book shops: Copies of the book can be obtained from the various public universities, Chartered Institute of Bankers, offices of HFC Boafo Microfinance Services Ltd, National Banking College, as well as from the publisher or the author.

Information on microfinance may abound in many books but when it comes to giving a comprehensive insight to, and making thorough analysis of, the microfinance sector in Ghana, there may be no other better book than the one titled ‘Microfinance and Poverty Reduction: The Experience of Ghana’, authored by Joseph Kimos Adjei, an academic and a practitioner in the field of microfinance.

The book, which is simply a masterpiece, has been produced from long years of academic inquisition into, and practical experience of, the microfinance sector in Ghana.

With a rich research background, the author illustrates the book with relevant graphs, tables, figures, academic references and scientific analyses that make very interesting reading, demonstrating the impact of microfinance on poverty-reduction in the country’s economy.

It is a must-read for players in the microfinance sector, researchers, lecturers and students of banking and finance and development studies, as well as public-policy crafters.

The foreword, which was written by Dr. David O. Andah, the Executive Secretary of the Ghana Microfinance Institutions Network (GHAMFIN), puts it thus: ‘Microfinance and Poverty Reduction: The Experience of Ghana’ is “a must-read for anyone interested in the growth of the small and medium-enterprise sector of the country which constitutes approximately 80 percent of the country’s business sector.

He adds: “The book has been set up to provide additional knowledge on the output of microfinance operations in Ghana.”

Coming in a beautifully-designed cover-pack, the book is cast in eight main chapters, the first of which provides clues to how microfinance can be used as an effective tool for poverty-reduction.

The author provides a vivid overview of poverty-reduction strategies in Ghana from 1980 to 2008, and the role of microfinance in reducing poverty in the country. He observes that for most micro and small entrepreneurs in Ghana, the lack of access to financial services “is a critical constraint to the expansion of viable micro-enterprises.”

Microfinance institutions have been allowed to operate and play a role in poverty- reduction through the provision of small loans, savings and insurance products, money transfer and other financial and non-financial services to enable the poor generate income, build assets, and improve on their housing structures and other related facilities.

The author, in chapter two, evaluates the development and success factors of microfinance in general, and makes a very intriguing comparison between micro-credit and microfinance. The chapter also examines the era of state intervention in providing financial services to farmers and other disadvantaged individuals with poor repayment records, as well as contemporary times when most commercial banks and other non-bank financial institutions have deemed it necessary to enter this growing and profitable but competitive market. The innovative mechanisms and the unique methodologies adopted by microfinance institutions are also explored.


In chapter three, Dr Adjei exhibits his rich understanding of theory and practice in microfinance by providing readers with evidence-based effects of microfinance programmes on poverty-reduction and asset-building. The chapter examines the empirical literature on microfinance and its effects on poverty-reduction in general.

Chapter four deals with contextual issues affecting microfinance in the country, examines some factors of poverty, such as population, the economy and inequality, and discusses the geographical disparities in poverty levels, gender dimensions of poverty and policies to support microfinance programmes.

Making references to World Bank and Ghana Statistical Service data, Dr. Adjei observes that although Ghana has achieved impressive economic growth rates since 1991, “poverty incidence and depth in the country remain high.”

He enumerates many interventions and programmes introduced at various times with the view to reducing poverty, among which include the Rural Finance Project, Rural Financial Services Project, Microfinance and Small Loans Centre and Ghana Microfinance Policy.

Microfinance in Ghana has come a long way, and for people who may have little or no knowledge about the history of the sector, the author provides in chapter five of the book in-depth information on the evolution of microfinance in the country to its current status.

In chapter six, the author makes the book a class act by bringing readers up-close to the operations of microfinance institutions. Presenting a case study of Sinapi Aba Trust (SAT), Dr. Adjei measures the depth of SAT’s outreach programmes through a survey that gives a better appreciation of the positive contributions of microfinance institutions.

While chapter seven examines the determinants of borrowing from SAT, it also analyses the effects of programmes on clients in terms of financial, human and physical capital/assets.

In tune with the adage that the past guides the future, the author peeps into the future in chapter eight, the last chapter of the book, as he discusses some challenges facing the microfinance sector in the country and the way forward.

Dr. Adjei observes that the key challenges confronting the microfinance sector in developing countries, including Ghana, are capacity-building; inadequate and expensive infrastructure base; poor credit delivery and management; inability to properly target the vulnerable and marginalized; research, monitoring and evaluation.

On the way forward, the author underlines the need for microfinance institutions to expand access to commercial sources of funding in order to enlarge their operational tentacles.

Furthermore, there is the need for microfinance institutions to develop the requisite skills and build good corporate governance, as well as dynamic and mission-oriented management to ensure efficiency.

The book: ‘Microfinance and Poverty Reduction: The Experience of Ghana,’ from my point of view, is a hidden treasure of microfinance issues exposed, detailing the development and impact of microfinance on poverty-reduction.

The chronicling of developments in microfinance operations using data, figures, graphs and tables indicates the book’s invaluable contribution to knowledge of the micro, small and medium-enterprises sector in the country and that of the African continent.

It is a masterpiece with ample recommendations from a rich Ghanaian mind.

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