Microcredit as a catalyst for microbusiness growth: a myth or reality; a case of Asante-Akim Central Municipality, Ghana

Abstract This study investigates the effect of microcredit on the growth of microenterprises in the Asante-Akim Central Municipal Area of Ghana. The analysis reveals that while larger loan amounts positively influence business growth, high interest rates and rigid repayment terms impede these benefits. Entrepreneurs with higher education levels report better growth outcomes, emphasizing the significance of financial literacy and management skills. However, the evidence indicates that microcredit alone is insufficient to consistently drive sustainable growth for microenterprises, as structural challenges persist. Practical implications suggest that microfinance institutions (MFIs) should revise loan structures to include lower interest rates, extended grace periods, and flexible repayment options. Additionally, integrating financial literacy programs into microfinance services could enhance loan utilization and business outcomes. These findings challenge the universal applicability of microcredit as a growth catalyst, advocating for tailored approaches to better align financial products with the needs of microenterprises in emerging markets.