Although livestock production is widespread in almost every part of Ghana, the output is about 8 percent of the country’s requirement. It is estimated that US $100 million is used on the import of livestock and livestock products annually in Ghana. In an attempt to close the gap between demand and supply of livestock products in the country, Ministry of Food and Agriculture (MoFA) granted credits to livestock farmers in 25 districts in Ghana including Wa Municipality under the Livestock Development Project (LDP). Government microcredit schemes in Ghana, however, suffered high rate of default and seems not to be making the desired impact. This paper sets out to assess the impact of the microcredit on smallholder livestock production, and identify the challenges and constraints confronting smallholder livestock farmers in Wa Municipality in running sustainable enterprises. Before assessing microcredit as a sustainable instrument for social and economic development, the viability of microcredit programmes and businesses had to be addressed. Sustainability is an important key to the viability of microcredit as a strategic instrument for the promotion of small enterprises’ growth and contribution to overall development. Sustainability, which refers to the potency of continuity as a closed, selfgenerating system, is therefore important. The credit in cash component of the project suffered a high default rate represented by 53.8 percent of the total amount expected from the recovery. As much as 47.5 percent of the credit in cash beneficiaries diverted the credit either in part or in full from purchasing livestock into other activities. Livestock production in Wa Municipality is constrained by high mortality rate, limited supply of feed, limited veterinary services and the type of livestock breed. In view of these findings, it was recommended that smallholder livestock farmers should be trained on fodder preparation, veterinary training institutions should be expanded and all veterinarians should be directly employed by Government, monitoring should be extended to cover every aspect of future projects, and demonstration should be carried out in future projects. Despite an overall general positive impact made on smallholder livestock production, the high default in repayment does not promote the sustainability of the LDP and poverty reduction among smallholder livestock farmers.