Abstract:

Microfinance emerged as a noble substitute for informal credit and an effective and powerful instrument for poverty reduction among people, the objective of this study is to estimate the effects of micro credit on the development of SMEs in Ghana. A total of 171 respondents were selected by using random sampling technique were administered to MFI and SMEs at Ho in the Volta Region, for them to indicate their views on micro credit in the area and how to improve it. A structured schedule of questions was prepared for this purpose. The research instruments used in the study were questionnaires and interviews. Simple statistical techniques such as descriptive statistics including tables were used in analyzing and summarizing the data. It was noted that access to financial institutions products and services is a crucial element for the development of SMEs. Thus their sustainable growth will largely depend on the capacity of financial institutions to mobilize resources from low valued to high valued and invest in SMEs activities. However, inadequate collateral, difficulty of processes, fear of inability to repay, and high borrowing cost were frequently mentioned reasons by SMEs for inaccessibility of banks products and services. Finally, The National Board for Small Scale Industries (NBSSI) and other SMEs funding and promotion agencies should incorporate SMEs coping strategies into their policies, programs and orientate them to replicate these strategies for others to enable SMEs have flow of resources (inputs) for production.

Keywords: Informal Credit, Economic Development, Income Generation, Industrialization, Economic Growth, Micro-Credit, Global Financial Systems, Alleviate Poverty.

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