Chapter 9: Designing financial products that support rural livelihoods: making microfinance work for the poor
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Markets matter for everyone. Inclusive market systems tend to offer the poor the services needed to sustain their livelihoods. The chapter examines the operations of three financial institutions: Sinapi Aba Trust (SAT), St Joseph's Cooperative Credit Union (CCU) and Sonzele Rural Bank (SRB) in Jirapa, a municipality in Northern Ghana. The objective of the chapter was to determine how MFIs' products and services can be designed to work effectively for the poor, taking demand and supply factors into context. We argue that the poor usually have limited options to benefit from growth when markets work inefficiently. A mixed-methods approach was used to collect data from six rural and urban communities. Data was sought from secondary sources, 20 interviews, ten focus group discussions and 120 questionnaires. The research adopted the Making Markets Work for the Poor approach as a guide in the framework of analysis. We identify high interest on loans, small loan sizes and the mismatching of loans with clients’ livelihoods were established as the leading constraints. Some of the prescriptions to address these constraints included that MFIs should charge accessible interest rates and tailor loan products parallel to the livelihood needs of clients. Also, lack of tailored/innovative savings options, lack of insurance policies for the poor, and limited networked access to a savings account are constraints with profound implications on clients' ability to save. The clients also believed that designing savings products to reflect clients' needs, providing access to affordable insurance policies for the poor and more savings incentives would stimulate clients to participate adequately in the savings market. The chapter concludes that accessible interest on loans and incentives to encourage savings would make microfinance markets work more sustainably for the rural poor. The findings challenge a reconsideration of the design of microfinance products to integrate financial technology as an efficient approach to delivering financial services, especially in rural areas.

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