Assessing the Loan Repayment Position among Agricultural Borrowers from Financial Institutions in Uganda A Case of Gulu and Pader District

ABSTRACT 

The Ugandan economy like most other developing countries has survived upon credit, grants and donations among other things. Credit in Uganda has been extended to business practitioners through commercial banks, non Bank financial intermediaries and non Governmental organizations. However it is believed that there is a rate of default in repayment of borrowed funds from financial institutions and especially so in the agricultural sector. The Main Objective of the study therefore sets out to examine how the existing credit policies used in microfinance institutions affect the loan repayment position in Uganda, to identify the challenges faced by clients in loan repayment in the H agriculture sector in Uganda, to examine the relationship between credit policies and loan repayment position among borrowers of agricultural sector and, to explore the stakeholders’ interventions on improving loan repayment position among agricultural F borrowers in Uganda with specific reference to microfinance institutions in Gulu and Pader Districts. This study adopted a cross sectional survey design. This research design means that it is analytical and descriptive in nature. The two financial institutions that participated in the study were randomly selected while the managers and credit officers were purposively selected from the rest of the staff. Client respondents were randomly selected. Primary data was obtained using questionnaires and was analyzed in frequencies and percentages. Data was presented in tables and figures. Findings indicated that credit policies are relevant because they favored most of the agricultural borrowers and they assisted in reducing bad debts. Therefore, there is a significant relationship between credit policies and loan repayment. Credit was specially found to be helpful in the provision of start-up capital, expansion of xli business and acquisition of inputs by farmers. Challenges were also identified as general poor management of credit institutions reflected in excessive luxurious expenses, lending to unprofitable enterprises and the general weak supervisory and regulatory systems characterized by poor entry screening; lack of skills and resources to carry out prudential supervision among others It was recommended that the financial institutions should ensure efficient loan / project appraisal procedures to avoid financing non-viable ventures. Monitoring and follow-up of financed enterprises should be intensified. It was also recommended that interest rates be reduced to match the level of economic activity. Grace and repayment periods for loans should be extended to enable borrowers pay small monthly installments which do not eat up the working capital before profits are realized. It was also strongly recommended that credit institutions should consider rescheduling and refinancing of funded enterprises which fail due to unavoidable circumstances and especially so to agricultural borrowers. In conclusion however, for the credit system to thrive, concerted efforts must be put H on ensuring repayment of borrowed funds. Non-performance is a hindrance not only to the credit but also to the overall financial system. It is therefore important to purposefully establish strategies that will guard against non-performance and enhance a lucrative credit system to ensure continued economic development.

TABLE OF CONTENTS

Chapter page

One THE PROBLEM ANDITSSCOPE 1

Background to the study 1

Statement of the problem 7

The purpose of the study 7

The specific Objectives 7

The research questions 8

The scope of the study 8

Significance of the study 8

Theoretical Framework 9

Two REVIEW OF RELATED LITERATURE 11

Introduction

Concepts,Ideas,Opinion From Authors/Experts 11

Theoritical Perspectives 11

Related Studies ii

Three METHODOLOGY 30

Research Design 30

Research population 30

Sample Size 30

Sampling Procedure 31

Research instruments 31

Data collection procedures 32

Validity and reliability of research instruments 33

Ethical consideration 33

Data analysis 33

Limitations of Study 34

FOUR PRESENTATION AND DISCUSSION OF THE FINDINGS 35

Overview 35

The socio-demographic characteristics measured in this research are age, sex, and level of education. 37

Responses obtained from the microfinance institutions 40

The length of time the staff has worked in the organization. 41

Challenges faced by agricultural borrowers from microfinance in Uganda 46

Stakeholders intervention on improving loan repayment position among agricultural borrowers in Uganda 58

FIVE FINDINGS, CONCLUSIONS AND RECOMMENDATIONS 62

Introduction 62

Conclusions 65

Recommendations 66

REFERENCE 68

Appendix I - Transmittal letter

Appendix II - Research Instrument

- Researcher's Curriculum Vitae