As Ghana strives to achieve the United Nations’ Sustainable Development Goals (SDGs), microfinance and micro insurance institutions have become indispensable in making a participatory economic growth and reduction of poverty possible.
These institutions are central in financial inclusion, capacity building through entrepreneurship promotion as well as fostering resilience within vulnerable populations by extending credit to them.
Promotion of financial inclusion
One of the key challenges in attaining SDGs is ensuring that everyone has access to financial services. Microfinance establishments (MFEs) have been up front in this endeavor with offers of small loans, savings accounts and other financial products to people who are usually outside the reach of traditional banking mechanisms.
MFEs provide opportunities for low-income families and small-scale entrepreneurs to invest in income generating activities hence improving their economic prospects and ending poverty.
Supplementing this effort, micro insurance institutions extend affordable insurance products exclusive to low-income earners. Institutions like this offer an array of insurance products such as life, health and even crop coverage products which offer relief to policy holders when an insured event occurs.
The risks micro-insurance addresses have been known to hinder the economic security forcing low-income individuals and small-scale businesses into destitution and a vicious cycle of poverty.
Empowering women and promoting gender equality
Achieving gender equality is one of the most important components of SDGs with MFIs having played a vital role in empowering women economically. Arguably, a significant number of beneficiaries from microfinance programs in Ghana are women.
By getting access to microloans, women can start or expand their businesses for purposes of boosting their incomes and socio-economic wellbeing. Women reinvest their resources earned into their families thus securing better health care, improved education for children meant for enhanced living standards in society.
Micro-insurance also promotes gender equality by focusing their coverage on women’s needs for example maternal health insurance. This ensures women have access to financial products that enable them to stay physically and economically healthy whilst continuing to thrive in their livelihoods.
Supporting Small Businesses and Entrepreneurship
Small businesses and entrepreneurs are the backbone of Ghana’s economy in terms of growth and job creation. However, many prospective entrepreneurs face financing constraints. Microfinance institutions fill this void by providing start-up and expansion capital for businesses. This is made possible through MFIs who foster entrepreneurship that in turn creates jobs, diversifies the economy as well as develops local industries.
Furthermore, micro insurance products provide financial relief when small businesses suffer unforeseen circumstances. An example is a business interruption coverage that supports entrepreneurs in recovering their losses from calamities and other unforeseen occurrences. It ensures business continuity and stability thus enabling enterprises owners to concentrate on development and innovation.
Enhancing agricultural productivity
Agriculture is one of Ghana’s leading economic sectors, employing a large portion of the country’s population. Microfinance organizations (MFOs) alongside micro insurance agencies support agricultural productivity and sustainability.
For instance, farmers can use micro loans to invest in quality seeds, fertilizers or irrigation systems thereby increasing crop yields therefore guaranteeing food security within their communities.
Micro-insurance policies that cover crops help guard against weather risks such as pests or diseases involving them among others. Such an action promotes sustainable agricultural practices while at the same time reducing vulnerability to climate change through encouraging investment into modern farming techniques.
Building resilient communities
Microfinance institutions and micro-insurance organizations’ products and services combine to form resilient communities, which can better deal with economic and natural shocks. These establishments boost the survival ability of people as well as entire societies by granting them entry to financial services and exposure to policies covering risks faced.
Microfinance and microinsurance will play a crucial role in ensuring that no one is left behind on the path to a bright and sustainable future as Ghana moves closer to its sustainability goals.
Hilda (MBA, MSc, PMP) is a Senior Analyst, Sustainable Finance, GreenFintech Group.
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