In the effort of successive Ghanaian governments to reduce poverty, several poverty alleviation programs have been implemented over the years, including the Growth and Poverty Reduction Strategy (GPRS II), the main objective of which is to ensure “equitable and sustainable growth, accelerated poverty reduction and the protection of the most vulnerable and excluded in a democratic and decentralized environment”. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay The 2010 Population and Housing Census estimates that 80% of the working population is in the informal private sector. The lack of access to credit by this category of population limits the development and growth of the private sector of the economy. This observation has been highlighted by several international bodies, such as the International Monetary Fund and the World Bank. The May 2014 International Monetary Fund report on Ghana highlighted that “financial sector weaknesses that limit financing opportunities for productive private investment are a particular impediment to business expansion in Ghana.” Access to financial services is therefore critical to the development of the informal sector and also helps absorb excess liquidity through savings that can be made available as investment capital for national development. The availability of loan facilities, especially for small businesses, constitutes one of the main advantages and the main tools of economic growth of a developing country. The more credit extended to various economic entities (individuals, businesses, and government), the greater the economic power of these entities. Microfinance institutions, which are one of the non-bank financial institutions in Ghana, have always been cited as a major player in providing loan facilities for the economic development of most developing countries. Most microfinance companies now offer a broader range of products and services than ever before, and their core function of putting community surplus funds (deposits) to work through lending to people remains as unchanged as it has always been. The role of microfinance institutions in developing local economies cannot be underestimated especially in developing countries like Ghana. In 2006, the total loans extended to customers by non-banking financial institutions in Ghana was GH¢115.10 million, up from GH¢71.63 million in 2005, thus indicating an increase of 35.4 % (Bank of Ghana, 2007). It is known that loans granted by microfinance institutions are normally intended for purposes such as small business and as “start-up” loans for businesses. There are other cases where credit is extended to groups consisting of a number of borrowers for collective enterprises ( Aryeetey et al, 1994). The upward trend in credit from non-bank financial institutions (NBFIs) to individuals, small businesses, groups and others indicates improvements in the level of microfinance in the country (Bank of Ghana, 2015). Extending credit lines is a major activity of all microfinance institutions, including savings and loan companies, rural banks, non-governmental financial organizations (FNGOs), and credit cooperatives. This is usually evidenced by the large percentage that loans make up in the overall operating activities of these lenders. Healthy loan portfolios are therefore vital for lenders to consider.