Assessing the Causal Effects of Microfinance on Economic Empowerment and Household Welfare of Women in Ghana: Instrumental Variable Evidence

Microfinance is widely promoted as a tool for strengthening economic empowerment of women and improving household welfare in low-income settings, yet empirical evidence remains mixed due largely to methodological limitations. This study estimates the causal effects of microfinance participation on economic and welfare outcomes of women in Ghana using survey data from 398 women across five regions. A quasi-experimental framework is applied, combining instrumental-variable techniques with treatment-effects and residual-inclusion models to correct for non-random programme participation. 

The results show that microfinance participation significantly increases the likelihood of income growth, consistent saving behaviour, access to healthcare, ability to pay school fees, and household food consumption. Selection-corrected estimates are substantially larger than naïve estimates, indicating that conventional models underestimate programme effects. Larger loan sizes further strengthen welfare outcomes, highlighting the importance of credit adequacy for productive use. The findings provide robust evidence that well-designed microfinance programmes can enhance women’s economic agency and household welfare in Ghana, with implications for financial inclusion and gender-focused development policy.