Microfinance Services and Poverty Eradication in Uganda a Case Study of Finca (U) Nakulabye Branch

ABSTRACT The study was set to analyze the relationship between Microfinance services and Poverty eradication in Uganda. The case study was FI7NCA (U) Nakulabye Branch. The purpose of the study was to examine the relationship between various microfinance services and poverty eradication in Uganda. The objectives of the study were to establish the impact of microfinance services on poverty eradication in Uganda and also to identify various microfinance services offered by microfinance institutions in Uganda. The study utilized descriptive research design which involved quantitative techniques of data collection. The total population was 803 clients and 51 management staff The sample size of 800 was taken as a representative sample of clients of FINCA (U) at Nakulabye Branch and 50 management staff was taken as a representative sample for the management. The findings of the study revealed that household incomes have increased for clients of microfinance institutions than those who are not clients. Similarly clients have been in position to own consumer durables and are in condition to live an improved standard of living. The research recommends that Microfinance institutions in Uganda should design client responsive products, introduce client exit surveys, have group guarantee systems, encourage Loan restructuring, train credit officers, Credit reference, charge customer friendly Interest rates, and Increase in loan terms. The researcher concluded that the services offered by microfinance institutions have a positive impact on the clients who access those services, since their standards of living is improved and they are able to establish small scale businesses as a result of accessed loans.

TABLE OF CONTENTS

DECLARATION

APPROVAL ii

DEDICATIONS iii

ACKNOWLEGEMENTS iv

LIST OF TABLES vi

TABLE OF CONTENTS vii

ABSTRACT ix

CHAPTER ONE 1

1.0 Introduction 1

1.1 Background to the study 2

1.2 Statement ofthe Problem 4

1.3 PurposeoftheStudy 4

1.4 Objectives of the Study 5

1.5 Research Questions 5

1.6 Scope ofthe Study 5

1.7 Significance of the Study 5

1.8 Conceptual Framework 6

LITERATURE REVIEW 7

2.0 Introduction 7

2.1 Microfinance Outreach 7

2.2 The Microfinance Services 8

2.2.1 Loans 9

2.2.2 Bank Accounts 10

2.3 Concept of Poverty 12

2.3.2 Income, Poverty and Inequality 13

2.4 Clients and Impact of Microfinance Services 15

2.4.1 Reduced vulnerability to economic risks 15

2.4.2 Strengthening linkages of clients and their households to the agricultural

sector 16

2.4.3

2.4.4

2.4.5

2.4.6

2.4.7

2.4.8

2.4.9

2.4.10

2.5

2.6

2.7

CHAPTER

RESEAR

3.0

3.1

3.2

3.2.1

3.2.2

Gender and Empowerment 16

Increased Employment Opportunities 17

Advice on how to use obtained funds 17

Reduction of Income Inequality 18

Poverty Alleviation 18

Increased Investment, Savings and Schemes 19

Education and Health 19

Development of Small-Scale Enterprises 19

Government Interventions in the Microfinance Sector 19

When Microfinance becomes less efficient 23

Challenges faced by MFIs in their efforts to eradicate poverty in Uganda.. 24

THREE 26

CH METHODOLOGY 26

Introduction 26

Research Design 26

Sources of Data 26

Primary source 26

Secondly source 26

vii

3.3 Study Sampling Procedure .27

3.3.1 Sample Size 27

3.3.3 Sample Selection 27

3.4 Research Population 27

3.5 Data Collection Methods and instruments 28

3.5.1 Questionnaires 28

3.5.2 Interviews 28

3.5.2 Documentary Review 28

3.6 Interpretation and presentation of data 28

3.6.1 DataAnalysis 29

3.7 Validity and reliability of the research instruments 29

3.7.1 Validity of the research instruments 29

3.7.2 The reliability of the instrument 30

3.8 Ethical Consideration 32

3.9 Limitations 33

CHAPTER FOUR 34

PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS 34

4.0 Introduction 34

4.1 Demographic Responses 34

Figure 4.1 Gender composition 34

4.2 Microfinance Services and Programs 37

4.3 Impact of Microfinance services on poverty eradication 39

4.4 Review of credit terms on loans offered by F1NCA (U) 42

4.5 Challenges faced by FINCA (U) in their effort to eradicate poverty 43

CHAPTER FIVE 44

SUMMARY OF MAJOR FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS 44

5.1 Summary of the Findings 44

5.2 Conclusion 45

5.3 Recommendations 46

5.4 Areas for Future Research 47

REFERENCES 48

APPENDIX A 51

RESEARCH QUESTIONNAIRE 51

TO CLIENTS OF FINCA (U) NAKULABYE BRANCH 51

APPENDIX B 55

STRUCTURED ESTTERVIEW GUIDE 55

- Microfinance services 55

Structured interviews for credit officers 55