The Heavily Indebted Poor Countries (HIPC) Initiative Fund Micro-Credit and Poverty Reduction in Ghana: A Panacea or a Mirage?

  • AK Osei-Fosu
Keywords: Heavily Indebted Poor Countries (HIPC), Poverty, Head Count, Poverty Gap, Squared


Since Ghana opted for the HIPC debt relief initiative and reached the completion point in June 2004 the country has received several billions of money into the HIPC account at the Bank of Ghana. Part of the funds has been given out in the form of micro-credit to poor households to help reduce their poverty situation. However, there are so many controversies surrounding the HIPC initiative and its benefit, especially, the impact on the incomes of the poor. It was therefore necessary to assess the impact of the micro-credit, especially how it has positively increased, if any, the income levels and therefore reduced the poverty rate. The basic hypothesis was that HIPC initiative fund micro-credit has reduced level and intensity of poverty among beneficiaries. The study was confined to Nkoranza and Wenchi districts, which have successfully maintained the HIPC Micro Credit Scheme. The Foster-Greer-Thorbecko (FGT) Index was used to measure the Head Count Ratio (HCR), Poverty Gap Index (PGI) and the Squared Poverty Gap (SPG), which assess, respectively, proportion of the population under the poverty line, depth of poverty and the severity of poverty. The study came out that incomes have been increased by an average of 26.72% and 25.50% for Nkoranza and Wenchi districts, respectively. Again, the study found that over the HIPC implementation period the number of people below the poverty line dropped from 78 to 62 and from 79 to 64 for Nkoranza and Wenchi districts, respectively, making 20.51 and 18.99 percentage point decrease for Nkoranza and Wenchi districts. Comparing PGI of the two years it was found that the cash transfer needed to lift the individuals above the poverty line decreased from 26.47 to 17.20 leading to 35.02% fall for Nkoranza and from 26.41 to 17.26 leading to 30.30% for Wenchi. This shows that people in the two districts were nearer the poverty line in 2004 than in the year 2000. This means that people are moving from hard core poverty zones. The results of the SPG of 7.49 and 7.44 for Nkoranza and Wenchi in 2004 against 13.66 and 17.26% in 2000, respectively, show that poverty intensity has also dropped by 45.45% and 55.56 for Nkoranza and Wenchi, respectively. Hence, the HIPC micro-credit is a panacea to poverty reduction.

Keywords: Heavily Indebted Poor Countries (HIPC), Poverty, Head Count, Poverty Gap, Squared Poverty Gap, Micro-credit

Journal of Science & Technology (Ghana) Vol. 28 (3) 2008: pp. 94-102

Journal Identifiers

eISSN: 0855-0395