What is Microfinance?
Microfinance is the provision of small loans to low-income populations who would otherwise lack access to formal financial services. Microfinance has lasting economic and social effects beyond the extension of a loan, because it also provides training in savings practices and business education.
Given the gender-biased nature of market economies in traditional societies, microfinance clients are generally women. Research shows that availability of finance to women better ensures that generated profits are ploughed back into the development of the household and family. By creating a means for women to build profitable businesses, microfinance not only supports women, but creates life-changing opportunities for their families, as well.
Our Practices
VEI-Ghana offers two types of loans to women and/or to groups of women: IGA (Income Generating Activity) loans and SME (Small to Medium Entreprise) loans.
These two loan types address the need for differentiated financial services targeting women in Volta Region today.
The IGA loans will follow a group-based lending format. IGA clients are often involved in petty trading of commodities. Within smaller rural communities, loans will be offered to individuals who have formed groups of between 10 to 20 potential loan beneficiaries. After a mandatory three-month savings scheme, each successful loan applicant will be allowed to receive a loan of 4 times their total savings. Business skills training will be integrated into the three-month savings period and will cover savings mechanisms, book-keeping, marketing and general business skill development. Initial IGA loans range from 50 to 500 Ghana Cedis (approx. $50-500US). Loan recipients will be eligible for loans of up to 1000GHC subsequent to repayment of earlier loans.
The SME loans will be offered to individuals operating existing businesses that are often more complex than IGA operations (e.g. have employees). SME loan recipients must also save one quarter of the requested loan amount, however, do not have to participate in business skills training nor a savings period of defined length. SME’s are eligible for first loans of between 500 to 1000GHC, and subsequent loans of up to 2000GHC.
In addition to these two loan types, we will offer savings and equity investment services for women entrepreneurs.
Our poverty alleviation strategies are currently being expanded to include:
- The provision of non-financial services attached to our loans as well as other services such as classes in business development; and,
- The development of micro-industries for job creation for underprivileged groups in Volta Region.