Who is reaching whom? Depth of outreach of rural micro finance institutions in Ghana

Abstract

Outreach of microfinance institutions has been saddled with the definition of who is poor specifically within the context of an individual’s capability to access financial and non-financial services. This paper presents empirical results of the structure of the microfinance market in Ghana as per institutions and defines the market target of each of the institutions based on the socio-economic characteristics of the clients Using the Microfinance Poverty Assessment Tool, data on 2704 households comprising of 1104 and 1600 non-clients and clients respectively, are collected to compute the household level relative poverty scores. The computed scores unraveled the depth of outreach of each microfinance institution. Five broad categories of microfinance institutions where identified namely; Rural and Community Banks, Financial Non-Governmental Organizations, Savings and Loans Companies, Susu Associations and Collectors and Credit Unions. The study results showed that the rural and community banks and the financial NGOs reached out to all categories of clients ranging from the extremely poor in the lowest wealth quintile to the poor in the highest quintile. At the other end, savings and loans companies and susu collectors reached clients within the above average and highest quintiles, while credit unions reached out to clients from the average to the highest quintile. Among factors alluding to the different market niches include; source of funds, strategies for outreach and mission of the institution. The derived policy implication is to harness the relative market strengths of the institutions and design specific products to deepen each institutions capability.