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le proprietorships and family based enterprises. High illiteracy levels abound among SMEs especially the smallholder farmers. Many are in business or farming for survival and as way of live. They lack even basic skills in entrepreneurship and business management (Rose Mwaniki; 2006:5). Due to lack of capital, entrepreneurial skills and management capacity, SMEs tend to remain basic and with low growth rates. Some of the institutions felt that irrespective of all these challenges, some SMEs are both innovative and dynamic. They are able to survive in volatile and competitive environments. Sometimes they combine different business activities in order to stay alive (Edit Lukàcs; 2006:9). SMEs especially smallholder farming tends to be of seasonal nature. To succeed the credit system must be compliant and tailored to the unique features of the enterprise. Small-scale farming enterprises are vulnerable to drought, floods, hail and other associated risks. They tend to grow horizontally – they will add a chain of other small businesses rather than grow with one form of business (vertical growth). SMEs seem to attract more poor women than men mostly for survival and due to low skills requirements (Edit Lukàcs; 2006:10).

3.0 Research Methodology

3.1.1 Definition Criteria of MFIs Selection

To identify and separate micro financial institutions that falls within the objectives of this research, the definition of both Addeah (1989) and Bernd Balkenhol (1998) was adopted. Hence a micro financial institution shall be a body incorporated by the Ghana companies code of 1963 (Act 179) as a “Non-Banking Financial Institutions (MFIs)” under the financial institution (Non-Banking) law 1993 (PNDCL 328) and which is licensed by the bank of Ghana to carry on the specific functions of acceptance of money from the public on either deposit account or current and lending of money. The population of study encompasses all Micro Financial Institution (MFIs) with focal attention on selected MFIs in the Kumasi metropolis and beneficiary small and medium scale enterprises (SMEs).

3.1.2 Data Collection Method

Data for this study was sought from Primary source. Primary data was sourced from the field of study through questionnaire administration. Formal and informal interviews were held between management of these MFIs and beneficiary SMEs. The questionnaires designed were tested to making sure that questionnaires were fully understood by respondents. Informal interviews method has been adapted to making sure that additional information that could not have been gathered through the use of questionnaires were captured. The formal interviews using questionnaires has been adapted to ensure that the researcher stayed focused on the background objectives that formed the basis of the study.

3.1.3 Sampling technique

For the purpose of this study, the activities of two (2) micro-financial institutions have been studied out of the total of about eight (8) registered micro-financial institutions in the Kumasi metropolis. These micro-financial institutions are; Garden City Savings and Loans (GCSL) and First Allied Savings and Loans (FASL).

The financial institutions were selected based on the following criteria.

The financial institution should boast of customers not less than 2,00