Small and micro enterprises (SMEs) form the backbone of Ghana’s economy, providing livelihoods, generating employment, and contributing significantly to local development. Yet, access to finance remains one of their greatest challenges. Traditional banks often view SMEs as risky due to limited collateral and unstable income flows. This is where Microfinance Institutions (MFIs) step in, bridging the gap by offering financial and non-financial services tailored to smaller businesses.

In this article, I draw on my research conducted in the Tamale Metropolis to examine how MFIs influence the growth and sustainability of SMEs. The discussion highlights the opportunities microfinance creates for small business development, the barriers entrepreneurs face when seeking credit, and the limitations of current microfinance models in reaching the most vulnerable groups.

Microfinance is often celebrated as a powerful tool for reducing poverty, especially across Sub-Saharan Africa. But how does it actually affect small and micro enterprises (SMEs) on the ground? My research set out to answer this question.

The study focused on three key areas:

• Business growth – Do microfinance institutions (MFIs) really help small businesses expand?
• Access to credit – Can SMEs secure financing easily and on fair terms?
• Beyond money – What non-financial support do MFIs provide, and what challenges do SMEs face in dealing with them?

To explore these questions, I gathered insights from both sides of the equation: the management and staff of Bonzali Rural Bank Ltd, and selected SMEs operating in Tamale. Using surveys and interviews, the findings were analyzed to reveal the real impact of microfinance in this local context.

Key Insights

• MFIs play a positive role in supporting business growth, offering both financial and social services.
• Access to loans depends heavily on business maturity, repayment ability, and collateral, such as land or other fixed assets.
• The poorest of the poor are often excluded, as they cannot meet entry requirements—leaving a gap in reaching those most in need.

Why It Matters

Microfinance in Ghana—and Tamale in particular—has proven valuable in strengthening SMEs. However, it is clear that without more inclusive policies, the most vulnerable will continue to be left behind. For microfinance to truly fight poverty, it must go beyond profitable clients and reach those who struggle at the margins.

This article is drawn from my Master’s dissertation titled “The Impact of Microfinance Institutions on the Development of Small and Micro Enterprises in the Tamale Metropolis.” The research was submitted to the University for Development Studies in partial fulfillment of the requirements for the award of a Master of Arts in Business Planning and Microfinance Management in 2013.