Financial Systems and Economic Growth in Selected Microfinance Institutions in Rusizi District, Rwanda

ABSTRACT In this study researcher investigated the relationship between effectiveness of financial systems and economic growth in selected MFI5 in Rusizi District Rwanda. It was carried out with the specific objectives to determine the profile of the respondents as to age, gender, highest level of education, and professional experience, determine the level effectiviness of financial systems in selected microfinance institutions, determine, the level of economic growth, and lastly, to establish relationship between the effectiveness of financial systems and economic growth in selected MFIs in Rusizi District, Rwanda The study was conducted though the uses of descriptive survey design and involved quantitative approach. SLOVEN’s formula was also used to determine a sample size of 174 respondents from 250 targeted populations and the sampling was done by the use stratified random sampling technique. Self administered questionnaires were used as research instrument and Content validity Index was used to ensure validity and reliability of research instruments. The ensured the ethical and logistic considerations of research and both qualitative and quantitatively were used to analyze data using statistical techniques such as mean and Pearson correlation matrix. Findings indicated that financial systems in terms of levels of loans in selected MFIS is still low with average mean of 2.43; level of economic growth in form of level of income and capital accumulation is high with average mean of 2.62. Findings also indicate positive significant relationship between financial systems and economic growth (r =.794, P< .000) at .05 level of significance. The study concludes that there is a positive significant relationship between Effectiveness of financial systems and economic growth. The study therefore recommends that Micro Finance umbrella organization be established and given strong support by Government and donors as a body to give guidance to the industry.

TABLE OF CONTENTS

Chapter Page

One THE PROBLEM AND ITS SCOPE 1

Background of the Study 1

Statement of the Problem 3

Purpose of the Study 4

General Research Objective 4

Specific Research Objectives 4

Research Questions 5

Research Hypotheses 5

Research Scope 5

Significance of the Study 7

Operational Definitions of Key Terms 8

Two REVIEW OF RELATED LITERATURE 10

Concepts, Ideas, Opinions from Authors/Experts 10

Theoretical Perspectives 27

Related Studies 30

Three METHODOLOGY 35

Research Design 35

Research Population 35

Sample Size 35

Sampling Procedure 36

Research Instrument 36

Validity and Reliability of the Instrument 37

Data Gathering Procedures 38

Data Analysis 39

Ethical Considerations 39

Limitations of the Study 39

Four PRESENTATION, ANALYSIS AND INTERPRETATION

OF DATA 41

Five FINDINGS, CONCLUSIONS, RECOMMENDATIONS 54

Research Findings 54

Conclusions 56

Recommendations 57

References 59

Appendices 64

Appendix I Transmitlal Letter 64

Appendix II- Letter from Umwarimu Sacco 65

Appendix III — Letter from Rim Ltd 66

Appendix IV - Research Instrument 67

Appendix V- Researcher’s Curriculum Vitae 71