THE MICROFINANCE INSTITUTIONS (MFis) AND POVERTY ALLEVIATION: A CASE STUDY OF PRIDE MICROFINANCE LIMITED, ARUA BRANCH-UGANDA
BY BAKORU ZAITUN RAMANDAN BBA/31712/ 102/DU
A RESEARCH DISSERTATION SUBMITTED TO THE COLLEGE OF ECONOMICS AND MANAGEMENT SCIENCES IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR'S DEGREE IN BUSINESS ADMINISTRATION OF KAMPALA INTERNATIONAL UNIVERSITY
MARCH 2013 DECLARATION
I Bakoru Zaitun Ramandan, declare that this research dissertation presented to the College of Economics and Management Sciences of Kampala International University is my original work and has never been submitted to any institution for any academic award.
Signature __ -~ ------______Date: ..l .T.~ .J. ~-.J. ~ J§...... BAKORU ZAITUN RAMANDAN BBA/31712/102/DU
1 APPROVAL
This is to certify that this research work of Bakoru Zaitun Ramadan titled, "The Microfinance Institutions and poverty alleviation with a case study of Pride Microfinance Limited, Arna branch", has been submitted to the College of Economics and Management Sciences for examination with my approval as a University supervisor.
Signature ....t~~ ...... Date:./ b.. .(. b. .. / '2-fl.CJ ......
DR. KINYATTA STANLEY (SUPERVISOR)
ii DEDICATION
This dissertation is dedicated to my beloved mother Mrs. Zurah Kihika, dearest uncles Mr. Haji Kihika, Abdu kihika and AbdulNuru Kihika,my grand papa mzee Ramandan Hassan and mzee Yunus kihika, all my friends and to all the employees of Pride microfinance limited-Arua branch for their great contribution towards the success of this dissertation.
111 ACKNOWLEDGEMENTS
First of all I would like to give my Honour and glory to the Almighty Allah who gave me good health, wisdom knowledge and hope to this study.
During the preparation of the research, I was blessed by many wonderful people who greatly contributed, corrected, guided and encouraged me and made this research study much easier up to its final completion.
A special thanks to my wonderful supervisor Dr. Kinyatta Stanley whose close supervision, guidance and thoughtful insight enabled me to get a clear view to write this report. May God reward you and bless you abundantly.
I also owe gratitude to my wonderful, uncle, and my beloved brothers Mansur Zubeir and Adam Zubeir and sisters Halisha Zabib, Nyangoma Hawa, and Halima Gift Zawadi, and my dear friends Wokoli Juma Sam, Nama Agnes Hurt ,Amaniyo Gloria, Tabu Gloria, Tiko Wahida, and Nawal Abdallah for the constant financial and non financial support they have given to me.
I would like to express my sincere appreciation to all the staff of the School of Business and Management of Kampala International University, not forgetting my wonderful respondents who provided all the required information in this study.
IV TABLE OF CONTENTS Declaration ...... i Approval ...... ii Dedication ...... iii Acknowledgements ...... iv Table of contents...... v List of tables ...... viii List of figures ...... ix Abstract ...... x
CHAPTER ONE: INTRODUCTION ...... 1 1.0 Introduction ...... 1 1.1 Background of the study ...... 1 1.2 Statement of the problem...... 3 1.3 Purpose of the study ...... 3 1.4 Objectives of this study ...... 4 1.5 Research questions ...... 4 1.6 Hypothesis ...... 4 1. 7 Scope of the study ...... 5 1.7.1 Content scope ...... 5 1.7.2 Geographical Scope ...... 5 1.7.3 Time scope ...... 5 1. 8 Significance of the study ...... 5 1.9 Conceptual framework ...... 7
CHAPTER TWO: LITERATURE REVIEW ...... 8 2.0 Introduction ...... 8 2.1 Definition of concepts and key terminologies ...... 8 2.2 Policies and procedures followed in loans administration ...... 9 2.3 Effectiveness of the loan administration policies ...... 10 2.4 Relationship between Microfinance institutions and poverty alleviation. 10
V CHAPTER THREE: RESEARCH METHODOLOGY ...... 12 3.0 Introduction ...... 12 3.1 Research Design ...... 12 3.2 Study Population ...... 12 3.3 Sampling procedure ...... 12 3.4 Sample size ...... 14 3.5 Research Instruments ...... 14 3.5.1 Questionnaires ...... 14 3.5.2 Interview guides ...... 15 3.5.3 Observation ...... 15 3.5.4 Documentary review ...... 15 3.6 Data sources ...... 15 3.6.1 Primary data ...... 16 3.6.2 Secondary data ...... 16 3.7 Validity and Reliability of the Study ...... 16 3.8 Data Analysis ...... 16 3.8.1 Editing...... 16 3.8.2 Use of tables ...... 17 3.9 Ethical consideration ...... 17 3.10 Limitations of the study ...... 17
CHAPTER FOUR: PRESENTATION INTERPRETATION AND ANALYSIS OF FINDINGS ...... 18 4.0 Introduction ...... 18 4.1 Demographic characteristics of the respondents ...... 18 4.3 Findings on how clients utilize the services they get ...... 34 4.4 Problems encountered by pride microfinance limited and clients...... 40
Vl CHAPTER FIVE: SUMMARY, CONCLUSIONS & RECOMMENDATIONS .... 43 5.1 Introduction ...... 43 5.2 Summary offindings ...... 43 5.2.1 Bio data information of the respondents ...... 43 5.2.2: Services offered and utilized by the employees and clients ...... 44 5.2.3: How clients utilize the services ...... 44 5.2.4: Problems faced by Pride microfinance limited and the clients ...... 45 5.3 Conclusion ...... 45 5.4 Recommendations ...... 46
REFERENCES ...... 4 7 APPENDIX A: DATA COLLECTION INSTRUMENTS ...... 48 (a) QUESTIONNIARES ...... 48 (i) FOR EMPLOYEES ...... 48 (ii) QUESTIONNIARE FOR THE CLIENTS OF PRIDE MICROFINANCE, ...... 53 (b) INTERVIEW GUIDE ...... 58 (i) Interview guide for employees ...... 58 (ii) Interview guide for clients of Pride Microfinance, Arua branch ...... 59 APPENDIX B: THE TIME FRAME OF THE STUDY ...... 60 APPENDIX C: BUDGET FOR THE STUDY ...... 61
Vll LIST OF TABLES
Table 3.1: Shows categorization of the respondents ...... 14 Table 4.1: Gender of the respondents ...... 18 Table 4.2: Marital status of the respondents ...... 20 Table 4.3: Age of the respondents ...... 21 Table 4:4: Occupation of the respondents who were employees ...... 23 Table 4:5: Occupation of the clients ...... 24 Table 4.6: Education Levels of the respondents ...... 26 Table 4.7: Departments where the employees belong to ...... 28 Table 4.8: Number of years spent by the employees at pride microfinance ..... 28 Table 4.9: Shows the monthly incomes levels of the clients ...... 29 Table 4.10 Findings on services offered by pride microfinance-Arua branch ... 30 Table 4.11: Shows whether the clients had ever got loan facilities ...... 31 Table 4: 12 How the clients utilized the services listed above ...... 32 Table 4.13: Response on how easy it was to get loan.s from the limited ...... 32 Table 4.14: Source of funds they use for paying back loans ...... 34 Table 4.15: Whether it was easy to pay back the loans ...... 35 Table 4.16: Whether their incomes improved after getting the loan ...... 35 Table 4.17: Whether they educate clients on utilizing the services ...... 36 Table 4.18: Opinion of employees on poverty reduction ...... 37 Table 4.19: Why employees believe poverty has somehow reduced ...... 38 Table 4.20: How the clients rate services offered by pride microfinance ...... 39 Table 4.21: Whether clients keep their money in pride microfinance ...... 40 Table 4.22: Whether their clients receive interests on their deposits ...... 40 Table 4.23: Problems encountered by pride microfinance limited ...... 41 Table 4.24 Problems encountered by the clients...... 42
viii LIST OF FIGURES Fig 1.1: Conceptual framework...... 7 Fig. 4.1: Gender of the respondents ...... 19 Fig 4.2: Marital status of the respondents ...... 20 Fig 4.3: Response of respondents by age ...... 22 Fig 4.4: Shows the occupation of the employee ...... 24
Fig 4.5: Shows the occupation of the clients ...... 25 Figure 4.6: Shows the Education Levels of the respondents ...... 27 Figure 4.7: Getting loan from pride microfinance ltd ...... 31 Fig 4.8: A bar graph showing the ease of getting loans ...... 33 Fig 4. 9: Whether clients are sensitized about usage of the loans obtained...... 37
IX ABSTRACT The study titled "The microfinance institutions and poverty alleviation, with a case study of pride microfinance limited Arua branch ", considered a population of 48 people from whom a 42 were chosen as respondents. Three research objectives which included identifying the policies used by the microfinance institutions, determining the effectiveness of these policies and thirdly examining the relationship between microfinance institutions and poverty alleviation.
Explanatory research design with study targeting the employees and clients of pride microfinance limited was used. Simple random sampling technique was used, self administered questionnaires, interviews, and observations were used to collect data. Primary data sources (interviewing respondents and use of questionnaires) and secondary sources (internet, libraries, textbooks and so on) were used. Data was analyzed qualitatively and quantitatively using computer packages Ms-Excel and Ms Word in tables, pie charts, and bar graphs.
From the study findings, women were the majority with 52%, those married were 62% with majority of the respondents between the age of 26-46 years and income levels of 300,000 - 500,000 and so their financial levels have increased. The main financial services offered were loan services and mobilization of savings. Most of the clients use the loans to boost their businesses and farms. Pride microfinance limited faces major challenges of high loan defaulters and competition from other financial institutions while the clients have challenges of high interest rates and short repayment period.
The following recommendations were therefore given by the researcher; good net working, government subsidization, extension of repayment periods, low interest rates, extending services nearer to the clients to mention but a few.
X CHAPTER ONE INTRODUCTION
1.0 Introduction This chapter contains the introduction of the study, the background of the study, statement of the problem, purpose of the study, objectives of the study, research questions, scope of the study, and the significance of the study.
1. 1 Background of the study Poverty alleviation has been a key development challenge over decades in all parts of Uganda. One of the identified key constraints facing the poor people is lack of access to formal sector credit to enable them to take advantage of economic opportunities to increase their level of output, hence move out of poverty. Arua district is one of the districts in Uganda badly hit by poverty as indicated by high prevalence of malnutrition, illiteracy, high infant and maternal mortality rates, and limited access to basic services such as education, health, clean water and sanitation in most counties and sub counties of the district. Inadequate access to credit by the poor has been identified as one of the contributing factors to poverty in Arua district.
However, the microfinance institutions in Arua district are playing a significant role in the alleviation of poverty in the district by availing their customers mainly the women financial services like loans, savings and insurance. The loans offered by these Microfinance institutions are supposed to be in small amount collateralized with very low interest rate so as to start small scale business and to improve on the already existing ones. One of the leading microfinance institutions with such leading role in the alleviation of poverty is Pride Microfinance Institution, Arua branch.
Pride Microfinance Limited which has got its head quarters at Metropole House, Entebbe Road in Kampala with over 29 branches country wide, is 1 Microfinance Deposit-taking institute supervised by the Microfinance of Uganda founded in 1995 to provide financial services to small and medium size entrepreneurs who are unable to access financial services through the Ugandan commercial Microfinance among other financial services such as money transfer through western union, Pride Smart Savings Account, Pride Akiba Savings Account, Fixed Deposit Account, Minor's Savings Account, Group Savings Account, Loan Insurance Fund, Group Guaranteed Loans, Individual Loans, Salary Loans, Asset Financing Loan, among others.
As of December 2009, Prime Microfinance Limited had 186,322 depositors with a total of US$13.5 million in deposits, averaging US$73 per depositor. There were 60,276 loan accounts, with an average loan amount of US$421 borrower, for a total loan book of US$25.4 million. As of December 2010, the institution's total assets were valued at approximately US$34 million (UGX:79.61 billion), with shareholders' Pride of approximately US$7.7 million (UGX:17.95 billion). At that time, the MFI had 231,076 depositors, of whom 66,179 were active borrowers as well.
It is one of the largest microfinance institutions in Uganda with a total employee of 505 in the year 2010 with the Arua branch, which is located at Avenue road at the heart of Arua Municipal Council having 48 employees.
Arua District is found in West Nile in North Western Uganda bordering Yumbe District to the north, Adjumani District to the northeast, Amuru District to the east, Nebbi District to the southeast, Zombo District to the southwest, the Democratic Republic of the Congo to the west and Maracha District to the northwest. The district headquarters at Arua are located about 425 kilometres (264 miles), by road, northwest of Kampala, the capital of Uganda.
Arua District has five counties after three of the original six counties were split off. Koboko was granted district status. Maracha was, in 2006, also granted 2 district status, (Maracha District). Initially, Terego County was also included in Maracha District (Maracha-Terego District). However, failing to agree on were the new district headquarters should be located, Terego County opted to remain part of the larger Arua District. The inhabitants of Terego County in Arua District and those of Maracha District, regard themselves as different ethnicities; although the Government of Uganda recognizes them as the Lugbara. The other counties in Arua District are: Vurra, Madi-Okollo and Ayivu; where the Arua District headquarters are located.
The 2002 national census estimated the district population at about 413,100, with an annual population growth rate of about 4%. It is estimated that in 2010, the district population is approximately 565,300.
1.2 Statement of the problem. Poverty continues to be the number one major problem in Uganda and Africa at large with 61 % of the total population still below the poverty line with women being the most affected (Ministry of finance planning and economic development March 24th 2010). Causes of poverty in Uganda include the rapid population growth, unemployment, low access to financial services and so on.
Therefore, poverty alleviation has been a key development challenge over decades. One of the identified key constraints facing the poor is lack of access to formal sector credit to enable them to take advantage of the existing economic opportunities to increase their level if output so as to move out of poverty. It is due to this problem that the researcher intends to find out the role of the microfinance institutions in poverty alleviation in Arua district.
1.3 Purpose of the study The purpose of the study was to assess the microfinance institutions and poverty alleviation taking a case study of Pride Microfinance limited, Arua branch. 3 1.4 Objectives of this study 1. To identity the policies used by the Microfinance Institutions in administering loans in a bid to alleviate poverty. 2. To determine the effectiveness of the above policies towards poverty alleviation in Arua district. 3. Examine the relationship between Microfinance Institutions and poverty alleviation in Arua district.
1.5 Research questions 1. What are the policies used by the Microfinance Institutions in administering loans in a bid to alleviate poverty? 2. How effective are the policies used by Microfinance Institutions towards poverty alleviation in Arua district? 3. What is the relationship between Microfinance Institutions and poverty alleviation in Arua district?
1.6 Hypothesis A research hypothesis is the statement created by researchers when they speculate upon the outcome of the research. The research therefore tested the following hypothesis;
❖ Extension of microfinance services in the rural areas of Arua district like Ayivu, Vura among others increased peoples' access to financial services such as acquisition of loans, savings of their incomes to mention but a few.
❖ Increased access to financial services such as loans enabled the people of Arua district to acquire capital to either start new businesses or expand on the old ones so as to generate incomes and so improve on their standards of living through improved nutrition, access to good education, health care, clean water, good shelter to mention but a few.
4 1. 7 Scope of the study 1.7.1 Content scope The researcher carried out her study in a microfinance institution in Pride Microfinance Institution, Arua branch on the microfinance institutions and poverty alleviation in Arua district, Uganda.
1. 7.2 Geographical Scope The study was conducted in Pride Microfinance, Arua branch, which is located at Avenue road at the centre of Arua Municipal.
1.7.3 Time scope The study took three months. That is to say, from February to March 2013.
1.8 Significance of the study The policy makers will use the study findings for exacting policies and laws that are to be followed by any Microfinance institutions in providing their services such as provision of loans, promotion of small scale businesses among others so as to alleviate poverty in Arua district and Uganda as a country.
The study will help the Microfinance institutions most especially Pride Microfinance Uganda to identify the gaps that hinder them from providing the best services to their customers and clients and see how they can be filled so as to reduce the loophole that exists in the fight against poverty alleviation that has been a big problem in increasing the finances and household assets of most of the rural people in Arua district and Uganda as a whole.
The researcher's findings will be a guide to future researchers on how they can collect data, analyze data, interpret and communicate them to relevant authority so as to help in policy making and formulation. The limitations and challenges faced during this research work will also enable the future
5 researchers to prepare adequately to meet them since they will be updated about such challenges in advance.
The researcher hopes that the study will add to the existing stock of knowledge as regards to the role of microfinance institutions in poverty alleviation and any other institution that has similar goal of alleviating poverty among the majority of the rural poor.
Completion of this research work will mean the researcher being awarded with a Bachelor's Degree in Business Administration from Kampala International University.
6 1. 9 Conceptual framework
Positive effects • Improved standards of living • Improve performance of small scale businesses • Improved in the services provided to the households
In pendent Variable Dependent Var ble
Micro finance Poverty Institutions Alleviation
Negative effects • Inadequate incomes • Low standards of living • Poor performance of small scale business • Collapse of the existing businesses
7 CHAPTER TWO LITERATURE REVIEW
2.0 Introduction Literature review is basically looking at what other people have written about a subject, it involves a secondary analysis of the available information already published in some form by other authors related to the topic under study.
2.1 Definition of concepts and key terminologies Poverty is a condition where people's basic needs for food, clothing, and shelter are not being met and it is either; (a) Absolute poverty which occurs when people cannot obtain adequate resources to support a minimum level of physical health. (b) Relative poverty occurs when people do not enjoy a certain minimum level of living standards as determined by a government. Relative poverty occurs everywhere.
According to Brandt (1996), poverty alleviation refers to all economic and non economic measures taken to provide satisfaction to individuals living in community to improve their social welfare.
Microfinance institutions are a financial institution specializing in Microfinance services for low-income groups or individuals through the provision of financial services to improve their standards of living.
According to Semuknon (1998), microfinance loans are small loans granted to the borrower's cash flow and other loans granted to the poor and low income households for their micro enterprise and small business to enable them raise their income level and improve their standards of living.
8 2.2 Policies and procedures followed in loans administration. In order to avoid losses, rnicrofinance institutions follow certain policies and procedures to administer loans to their clients which include the following.
Obtaining an application form: The customer fills a loan application form from the microfinance institution where he/she needs to get the loan from. Along with the application form, necessary documents like address proof, age proof, proof of income, Microfinance balance and so on are also to be attached with the application form before it is submitted to the credit department of the Microfinance.
Personal Discussion: The customer discusses face-to-face with the loan authorities during which process the financial institution evaluates the papers submitted and summons the applicant for the personal discussion regarding the loan applied for.
Field Investigation: The loan authorities sent their representatives to the existing residence of the applicants or their offices for the validation of the documents submitted. This is the essential part for the Microfinance to establish the trust with the applicants.
Credit appraisal by the loan department: The financial centre establishes repayment capacity based on one's income, age, qualifications, experience, employer, nature of business etc. to access your credential. The institution can refuse the loan application if any discrepancy is found at this stage. But if everything goes according to the conditions negotiated by both the parties then the Microfinance sanction the loan that may be unconditional or with conditions levied.
Offer Letter: After the sanction of the loan, the applicant gets offer letter from the financial institution which will show the loan amount, rate of interest, 9 mode of repayment, general terms and conditions of the loan, special conditions, if any. The applicant then signs the duplicate copy of the offer letter and which is then submitted to the Microfinance institution when (s)he agrees. Submission of legal documents and legal check: The financial institution asks for the legal documents of the property involved for applying for the loan. All the legal documents of the property involved have to be submitted.
2.3 Effectiveness of the loan administration policies used by Microfinance Institutions. The above policies used by the microfinance institutions in administration have both negative and positive effectives in poverty alleviation. Policies and procedures cover all aspects of any loan from any Microfinance or financial institution and grant making operations, helping to ensure consistent and open delivery of loans, grants and other financial programs and services.
These policies have helped to establish n1les for lending out loans to the customers therefore losses incurred by the financial centres in administration are minimized. Since the loans are given to those with collateral securities, it is hard for the borrower to escape with the loan since the security can still be sold to recover the loan incase he/she escapes.
2.4 Relationship between Microfinance institutions and poverty alleviation in Arua district. There is a very close relationship between microfinance institutions and poverty alleviation in a way that they enable low income people access financial and non financial services such as small loans, saving schemes and other services for working capital and income generation. These small income earners and users of micro finance services sometimes later graduate to be clients of larger financial intermediaries. Therefore, Microfinance institutions provide a stepping-stone for the poor to access financial services and to use micro finance services to bridge cash gaps in their work system. 10 One of the achievements of the microfinance intervention has been the innovation of lending technologies that are more suitable for the poor. These microfinance institutions therefore emerged to provide microcredit for poverty alleviation to poor households using mainly personal and group lending, small progressive loans and targeting especially women.
According to Walugambe (2000), without some sort of credit, small scale business could not operate, this called for the intervention of Microfinance loans to improve their performance in poverty alleviation. Small and medium enterprises (SME) policy unit, (2003) accessing loans bust way of uplifting small scale businesses hence reducing poverty.
The former minister of finance, Dr. Ezra Suruma while delivering 2005/2006 budget, New Vision 9 th June 2005 page 2 says that; "The government will assist in provision of micro finance and or Pride Microfinance, Arua branch infrastructure including training their management in area of record keeping, supervision of saving and credit association and other niral organizations. The government will build on these efforts to ensure that there is a Pride Microfinance, Arua branch or micro finance institutions in every sub-county with in there years so that poverty can be reduced".
11 CHAPTER THREE RESEARCH METHODOLOGY
3.0 Introduction In this chapter, the researcher identified, specified and discussed all the possible methods which were applied in carrying out the study. Both qualitative and quantitative techniques of data collection and analysis were used since one research method could not yield an authentic report on the microfinance institutions and poverty alleviation in Arua district, Uganda.
3.1 Research Design The study was mainly descriptive cross sectional survey design because much of the data collected from the field was quantitative and it was obtained through the use of questionnaires and interview guides which was used to collect the required information from the staff and clients of Pride microfinance, Arua branch. Interview schedule yield qualitative results if presented using relevant statistical techniques and the analyzed.
3.2 Study Population This study was conducted at Pride microfinance, Arua branch which has a total population of 48 employees in the year 2012. The researcher selected a sample size using the Slovene formula from this population so as to collect adequate and accurate data.
3.3 Sampling procedure Sampling is the process of choosing members of a population to be in sample (Paul 1997) This study employed stratified sampling, simple random sampling and purposive sampling techniques to select the key respondents; the stratified sampling technique identified sub-groups in the population and their proportions and was selected from each group to form sample using simple
12 random sampling. In the purposive sampling the researcher used her own judgment about the respondents.
According to Sloven sample size is determined by the below formula; n= N
1 + (Ne2) Where n = Sample size N = Target population e =margin of error at 5% standard value
Therefore, Sample size
11 = 48 1+ (48 (5/ 100)2
n= 48
1+ (48* 0.052
n= 48
1 + (48 *0.0025)
n= 48
l+ 0.12
n= 48
1.12
Sample size - 42 respondents
13 3.4 Sample size A sample is a small proportion of a target population selected for comprehensive analysis to represent the whole population. Basing on the calculation in the sampling procedure above, the researcher used the sample size of 42 respondents who represented the whole population of 48 people who were randomly selected by identifying respondents who best suit the theme of the study as shown on the table below:
Table 3.1: Shows categorization of the respondents. Respondents Frequency (f) Percentage (%) Cashiers 5 12 Accountants 5 12 Loan officers 8 19 Clearing agents 5 12 Managers 5 12 Security guards 2 4 Cleaners 4 10 Clients 8 19 TOTAL 42 100 Source: The Researcher
3.5 Research Instruments The researcher used different data collection methods or instruments to get the information required from the field to complete this study. These methods included the following:
3.5.1 Questionnaires The questionnaires were self administered to the respondents. The questionnaires included both open ended and close ended questions. The respondents were approached and distributed with the questionnaires which they filled with the answers of different views. The researcher employed this
14 method because it covered many respondents relatively at a shorter time. Besides, questionnaires allowed the respondents to give free and independent opinions because they were not affected by the presence of the researcher.
3.5.2 Interview guides The research also involved face-to-face talk between the researcher and the respondents. The researcher employed this method because it was also flexible and allowed explanations of the questions to eliminate ambiguity, provide an opportunity of correcting misunderstandings by the researcher and the respondents, which would not be common with other forms of data collection.
3.5.3 Observation This was conducted through silent observation of the state of the respondents by the researcher in order to come up with the report. The researcher used this method as it employed less complications and less time consuming procedures of the selection and it provided first hand information which was more valid than reported information obtained from questionnaires and interviews.
3.5.4 Documentary review Under this data collection method, the researcher carried out her study by carefully studying literature reviews and other secondary sources of information such as the internet, related to the study basing on the objectives of the study. This data collection instrument had the following importance; related data give direction when setting questionnaires, interviews and readers of this study who became suspicious of the data findings always referred to the literature review especially in chapter two.
3.6 Data sources The sources of data collection were both primary and secondary. These included the following:
15 3.6.1 Primary data This is the first hand information that was collected from the field by the aid of techniques like interview guide, questionnaires, observation and references to the secondary data.
3.6.2 Secondary data Under secondary data, information was extracted from the text books and work of other scholars whether published magazines, written data source including published and unpublished documents agency reports, news papers articles, internet sources, proposal books, local government, acts among others so as to obtain relevant information.
3. 7 Validity and Reliability of the Study Content validity was ensured by subjecting the researcher devised questionnaires on resource availability and utilization to judgment by the content experts who estimated the validity on the basis of their experience. The test-retest technique was used to determine the reliability accuracy of the researcher devised instruments.
3.8 Data Analysis During and after data collection, the researcher used different methods to process the data that was collected so as to come up with a report that is easy to interpret and understand. The methods of data processing and analysis that was used in this study included the following:
3.8.1 Editing The raw data that was collected from the field was edited so as to determine the errors and omissions for necessary corrections to be made. This was done thorough careful reading of the raw data till the required results were obtained.
16 3.8.2 Use of tables The researcher also used tables and graphs to present the major findings of the study. Numerical findings were processed, interpreted and presented in tables which have columns and rows, and graphs.
3.9 Ethical consideration Before going to the field, the researcher begun with getting authorization letter from the Dean, school of Business and Management then took it to the respondents and this enabled the researcher attain adequate information from the respondents. During the process of data collection, confirmation was given to the respondents that the reason for the research will be for only academic purposes and that all the information would be kept confidential.
3.10 Limitations of the study The researcher was faced with a problem of money since a lot of money was needed to pay for stationary, transport expenses, typing and printing, binding, photocopying other necessary obligations at the university. However, this problem was solved by seeking financial assistance from relatives and friends.
Some respondents feared to disclose off matters regarding their lives and the confidential information of the financial institution limiting the quality of the information collected. The researcher ensured the respondents that this study was carried out for academic purposes only and any information they gave would be treated with utmost confidentiality.
There will also be a problem where some of the respondents do not read or speak English yet the questionnaires will be prepared in English. This will make it difficult for the researcher to collect the required information in time. Although this is a big problem that the researcher will encounter, it will be solved by ensuring that the respondents who cannot read or speak English will be met face-to-face by the researcher. 17 CHAPTER FOUR PRESENTATION INTERPRETATION AND ANALYSIS OF FINDINGS
4.0 Introduction This chapter contains the presentations, interpretations, analysis and discussions of the research findings; it presents data that was collected using questionnaires, interviews and observation. In the same chapter, data was presented, interpreted, analyzed and discussed along the themes under study.
The chapter begins with looking at the distinctiveness of the respondents in areas of gender (sex), age, marital status, level of education, and occupation of the respondents in relation to the topic under study. The chapter goes further to analyze the policies used by the microfinance institutions in administering loans in a bid to alleviate poverty, examining the effectiveness of these policies towards poverty alleviation in the district and finally examining the relationship between microfinance institutions and poverty alleviation in Arua district.
4.1 Demographic characteristics of the respondents This part of the study analyzed the background information of the respondents in relation to their age, gender, marital status, academic qualification, and their occupation as it (details of respondents) presented through the use of tables and graphs such as pie charts and bar graphs for better and easier interpretation and understanding.
Table 4.1: Gender of the respondents Gender Frequency (f) Percentage (%) Females 22 52 Males 20 48 Total 42 100 Source: Primary data
18 From the findings, it has been clearly indicated that male respondents outnumbered the female respondents in the study as the male respondents were 22 while the female respondents were 20 thus making a difference of 2 respondents. The difference in the number of respondents between the males and the females is not too much because most of the respondents from among the employees of Pride microfinance, Arua branch were males while those from among the clients were mainly females.
But the researcher strongly believed that the information needed for the study would be collected as the difference in the gender number of the respondents was not too much. There was therefore balanced information provided by both genders.
Fig. 4.1: Gender of the respondents
nFe1na1es
■ Males
Source: Primary data The pie chart above reveals that 52% of the respondents were females while 48% of them were males. The number of females was slightly higher than that
19 of the males although the difference is not much. The researcher aimed at sampling mainly the women since they are the most affected by poverty.
Table 4.2: Marital status of the respondents Gender Frequency {I} Percentage (%} Married 26 62 Divorced 10 24 Single 06 14 Total 42 100 Source: Primary data According to the findings above, the researcher found out that 26 of the respondents were already married, only 6 were still single, and then 10 of them were once married but they have now divorced their marriages due to reasons well known to them. This means that majority of the respondents were all adults who were at the age of marriage or beyond it.
Fig 4.2: Marital status of the respondents
I'm Married
~ Divorced
■ Single
Source: Primary data
20 According to the findings above, the researcher found out that 62% of the respondents were already married, only 14% were still single, and then 24% of them were once married but then divorced their marriages.
As the pie chart indicates, majority of the respondents were those who were already married. This was because majority of the respondents were in the ages of 26 to 46 which are the ages where most of the people in this age group were married. Secondly the researcher targeted mainly the adults who were either engaged in business activities or at least farming or at least an income generating activity. Those who qualify to receive financial services from the financial institutions.
Table 4.3: Age of the respondents. Age brackets Frequency (fl Percentage (%) Below 18 2 5 18-25 6 14 26-36 12 29 37-46 14 33 Above 47 8 19 Total 42 100 Source: Primary data
From the above table indicates the clients and employees of pride microfinance institution, Arua branch who were selected to provide information for this study. The table revealed that the majority of the respondents were between the age brackets of 37-45 followed by 26-3 as they were 14 and 12 respondents respectively. Those below 18 were only 2 and those above 47 were 8. It was evidenced that the clients between the ages of 26 and 46 utilize the services of Pride microfinance-Arua branch so well and were benefiting more than the other age groups. It was also in the same age brackets that most of the employees of pride microfinance fall.
21 Most of the clients who were chosen as respondents fell in this age brackets of 26-46 probably because of the fact that it is this age group that very actively engages in commercial farming and trade and therefore and so needed a lot of financial support to backup their businesses or start new ones. They also have the capacity to pay back the loans and present collateral securities. As for the employees, this is the age at which most of the people have reached a higher level of education whereby they are capable of being obtaining jobs in the financial institutions hence malting most of the employees in pride microfinance to fall within this age group.
Fig 4.3: Response of respondents by age.
35
30 lillBelow 18
25 illl 18-25 20 w26-36 15
10 "'37-46
5 ■ Above47 0 Below 18 18-25 26-36 37-46 Above 47
Source: Primary data. According to the bar graph above, majority of the respondents were in the age brackets 37-46 as they made a percentage of 33%, followed by those respondents in the age brackets of 26-36 as they made a total percentage of 29%. Other age groups had small number of respondents as those below the age of 8 made a percentage of only 5% while those who were above the age of 47 made a percentage of 19%.
22 Table 4:4: Occupation of the respondents who were employees. Occupation of employees Frequency (/) Percentage (%) Managers 4 10 Loan officers 12 29 Accountants 8 19 Cashiers 9 21 Others 9 21 Total 42 100 Source: Primary data The table above shows the positions of the respondents working in pride rnicrofinance-Arua branch. It indicates that only 4 respondents were managers, 12 were loan officers, 8 of them were accountants, the cashiers made a total of 9 and finally those who had other positions such as the cleaners, security guards, relationship officers, customer care officers to mention but a few made a total of 9 respondents.
More of the respondents chosen were loan officers because the study aimed at majorly this department as the main aim of the study was to find out the role of the micro financial institutions and poverty alleviation which was done through provision of mainly loans to the clients which was given to them through the credit department where the employees working therein were/are the credit officers.
23 Fig 4.4: Shows the occupation of the employees
35
!Ill Managers
"' Loan officers
l'II Accountants
ll! Cashiers
■ Others
Source: Primary data. The bar graph above shows the positions of the respondents working in pride microfinance-Arua branch. It indicates that only 10% of the total respondents were managers, 29% were loan officers, 19% of them were accountants, the cashiers made a total of percentage of 21 % and finally those who had other positions such as the cleaners, security guards, relationship officers, customer care officers to mention but a few made a total percentage of 21 % as well.
Table 4:5: Occupation of the clients. Occupation of employees Frequency (I} Percentage (%) Civil servants 8 19 Traders 10 24 Farmers 14 33 Others 10 24 Total 42 100 Source: Primary data 24 As the table above clearly reveals, majority of the respondents seeking for financial assistance from pride microfinance were the farmers as they made a total of 14 respondents, followed by the traders who were 10, the civil servants were only 8 and other clients such as the peasants made a total of 10. The farmers and traders made a big total probably because they have small scale businesses and sources of income to support their businesses and farms and so to expand on them, they have to seek for financial assistance. These groups of the respondents also need the loans to cater for other financial needs such as education of their children, welfare, among others.
As for the civil servant, since they have other sources of earnmg income through their monthly salaries and allowances, they do not depend so much on getting financial assistance from pride microfinance or other financial institutions in the district. They instead deposit and save their money in these financial institutions for safety instead of borrowing.
Fig 4.5: Shows the occupation of the clients
35
30 ■ Civil servants
25
20 ■ Traders
15 ■ Farmers 10
5 !'!I Others
0 Civil Traders Farmers Others servants
Source: Primary data.
25 According to the bar graph above, majority of the respondents seeking for financial assistance from pride microfinance were the farmers as they made a total percentage of 33%, followed by the traders who made a percentage of 24%, the civil servants made a percentage of only 19% and other clients such as the peasants made a total percentage of 24%. The farmers and traders made a big total probably because they have small scale businesses and sources of income to support their businesses and farms and so to expand on them, they have to seek for financial assistance. These groups of the respondents also need the loans to cater for other financial needs such as education of their children, welfare, among others.
Table 4.6: Education Levels of the respondents Occupation of employees Frequency (f} Percentage (%) University 14 33 Secondary 12 29 Primary 10 24 Never went to school 6 14 Total 42 100 Source: Primary Data According to the table above, 14 respondents had reached the university and obtain different qualifications such as certificates degrees, diplomas, masters among others; 12 respondents had stopped in secondary level (either in ordinary or advance level); 10 of the respondents dropped out in primary and 6 others did not go to school at all.
Those respondents who reached the university to obtain the different qualifications were mainly those working in pride microfinance and the civil servants and other traders. Most of the farmers were those who either did not have any academic qualification or dropped out of school at early stages of learning such as at either primary or secondary level.
26 They either did not go to school or dropped out of school due to financial difficulties or due to some other reasons known to them and as a result, they have to seek for financial support from the financial institutions such as pride microfinance so that they can resort into other ways of survival such as farming, business and so on.
Figure 4.6: Shows the Education Levels of the respondents
35 ~-----··--
30 ri University
25 ~secondary 20
15 "'Primary 10
5 Never
0 University Secondary Primary Never ----- Source: Primary data According to the bar graph above, 33% of the respondents had a maximum level of university academic qualification such as certificates, diplomas, degrees, masters to mention but a few; 29% of the respondents stopped with their education either at ordinary or advance level of secondary education; 24% stopped in primary level and 14% of the other respondents did not go to school at all and hence they had no academic qualifications at all.
It should be noted that most of those respondents who reached university level were those working either at pride microfinance, Arua branch or those who
27 were working as civil servants elsewhere. For those respondents who did either not go to school at all or stopped at primary, ordinary or advance level were mainly those who ended up becoming either farmers or business men and women or traders.
Table 4. 7: Departments where the employees belong to. Departments Frequency (J} Percentage (%) Finance 17 40 Administration 4 10 Credit/Loan 12 29 Others 9 21 Total 42 100 Source: Primary Data The employees of pride microfinance who were selected as respondents were from the different departments of the financial institution. Majority who made a total of 17 people with a percentage of 40% were from the finance department and these included the cashiers and the accountant. Still, 12 of the respondents were from the credit/loan department making percentage of 29% and so this included the credit officers. The respondents from the administration department were mainly the managers and they made a total of 4 respondents with a percentage of 10% and finally those from other departments were 9 making a percentage of 21 % in total.
Table 4.8: Number of years spent by the employees at pride microfinance Years spent Frequency (J} Percentage (%) Less than 1 4 10 1-2 6 14 2-4 11 26 Above 4 21 50 Total 42 100 Source: Primary Data 28 According to the table above, the number of years that the employees have spent at pride microfinance institution varied greatly. As indicated above, only 4 respondents making percentage of 10% were newly employed and had spent less than a year, 6 of the respondents who made a percentage of 14% have spent 1-2 years, 11 of them (the respondents) with a percentage of 26% had spent 2-4 years but a big number ofup to 21 respondents with a percentage of 50% had spent more than 4 years at pride microfinance institution, Arua branch. These results indicate that pride microfinance has a tendency of retaining its employees for a longer time period.
Table 4.9: Shows the monthly incomes levels of the clients Income levels Frequency (J} Percentage (%) Below 100,000 5 12 100, 000-300, 000 11 26 300,000-500,000 14 33 Above 500,0000 12 29 Total 42 100 Source: Primary data As seen from the above table, the majority of people who utilize the financial services are middle income earners, that is those earning between 300,000/= and 500,000/= as they made a total number of 14 with a percentage of 33% closely followed by those earning above 500.000/= as they made a total of 12 and a percentage of 29%. There were 11 respondents with a percentage of 26% who were earning between 100,000 - 300,000 per month. The real poor who made a total of 5 people and a percentage of 12% were earning less than 100,000/= per month representing showing poor utilization of the financial services provided by pride microfinance.
The study also found out that those respondents who were earning a bigger amount of money, that is to say above 500,000 shillings were mainly the civil
29 servants and those working in pride microfinance as the farmers and the peasants who depended on their farm produce had little to earn. The meager earnings by the farmers or peasants have made them to continue remaining poor despite their efforts to work hard. However, with the financial services such provision of loans with low interest rates, encouraging them to save, and so from these financial institutions extended to these poor people, their levels of incomes had started to rise as they were able to expand on their already existing businesses or start new one.
4.10 Findings on services offered by pride microfinance-Arua branch Table 9: Services provided and utilized at pride microfinance Categories Frequency Percentage (%) Mobilizing savings 15 35 Loan facilities 17 40 Advisory services 4 10 Monitoring & supervision 2 5 Micro insurance 0 0 Community mobilization 2 5 Employment opportunities 2 5 Participation in social activities 0 0 Total 42 100 Source: Primary data From the table above, all the 42 respondents selected from pride microfinance Arua branch responded as below regarding the services offered and utilized at the micro financial institution: 15 respondents said the services offered and utilized are mobilization of savings, the biggest number of the respondents who were 17 in total making a percentage of 40% responded about loan facilities, 4 respondents who made a percentage of 10% said the services offered are advisory services, 2 respondents with a percentage of 5% said monitoring and supervision, community mobilization and participation in social activities are
30 the services offered by this micro financial institution respectively, none of the respondents commented about micro insurance being a service here.
Table 4.11: Shows whether the clients had ever got loan facilities from pride microfinance-Arua branch Response Frequency Percentage Yes 30 71 No 12 29 Total 42 100 Source: Primary Data From the table above table, 30 out of the 42 respondents representing 71 % have utilized the loan facility and only 12 of them who made a percentage of 29% did not. This shows that majority of the clients have ever got loans from pride microfinance limited, Arua branch. This analysis can be further showed in the pie chart below.
Figure 4. 7: Getting loan from pride microfinance limited, Arua Branch
~Yes
Ill No
Source: Primary Data
31 According to the pie chart above, 71 % have utilized the loan facility and only 29% did not. This shows that majority of the clients have ever got loans from pride microfinance limited, Arua branch.
Table 4: 12 How the clients utilized the services listed above Categories Frequency Percentage (%) Increase business income 14 33 For domestic welfare 6 14 Increase farming 16 38 Cater for emergencies 2 5 Other utilization 4 10 Total 42 100 Source: Primary data According to the table above, 14 of the respondents said they borrow money from pride microfinance to increase on their business income, 6 of the respondents said they borrow the loans from pride microfinance to cater for domestic purposes such as payment of school fees, feeding and so on; 16 of them who were the majority said they utilize the incomes borrowed from this financial institution to increase farming, 2 respondents said they use the incomes for emergencies and 4 other respondents said they use it for other purposes.
Table 4.13: Response on how easy it was to get loans from the limited. Response Frequency Percentage Very easy 2 5 Easy 14 33 Difficult 18 43 Very difficult 8 19 Total 42 100 Source: Primary Data
32 Only 2 of the clients found it very easy to get a loan from pride microfinance limited-Arua branch, 14 of the respondents found it easy to get a loan from pride microfinance limited, 18 of the sampled clients found it difficult while 8 of them found it very difficult to get a loan from the financial institution. From the above analysis, it was evident that getting a loan from the pride microfinance is not easy as there are a number of procedures one has to follow and the requirements such as collateral securities for obtaining the loan are beyond the reach of majority of the clients.
Fig 4.8: A bar graph showing the ease of getting loans
50
45 mveryeasy 40 35 11 Easy 30 25
20 11 Difficult 15 10 itiVery 5 difficult 0 Very easy Easy Difficult Very difficult
Source: Primary Data According to the above bar graph, 5% of the respondents found it very easy to get a loan from pride microfinance limited-Arua branch, 33% of the respondents found it easy to get a loan from pride microfinance limited, 43% of the sampled clients found it difficult while 19% of them found it very difficult to get a loan from the financial institution. From the above analysis, it was evident that getting a loan from pride microfinance is not easy as there are a
33 number of procedures one has to follow and the requirements such as collateral securities for obtaining the loan are beyond the reach of majority of the clients.
4.3 Findings on how clients utilize the services they get from Pride microfinance limited. The clients who obtain these loan services from pride microfinance limited used the loans for different purposes. These was presented and interpreted in form of a table as given below.
Table 4.14: Response of clients on the source of funds they use for paying back loans. Source Frequency Percentage Business 16 38 Salary 8 19 Farming 12 29 Others 6 14 Total 42 100 Source: Primary Data Out of 42 people/respondents that took the loans 16 (38%) agreed that they paid loans from incomes they got from their businesses, 8 ( 19%) said that they were helped by their salaries and other employment income, 12 (29%) repaid the loans from the income they got from farming, and 6 (14%) paid back the loans from incomes they got from other sources such as borrowing from a colleague, selling personal assets, previous savings and so on. This shows that traders were at a better advantage when it came to the clearance of the debts followed by the farmers.
34 Table 4.15: Showing responses of clients on whether it was easy to pay back the loans Response Frequency Percentage Very easy - - Easy 10 24 Difficult 18 43 Very difficult 14 33 Total 42 100 Source: Primary data. Of the total respondents who took part in answering this research question in the questionnaire, none of them said it was very easy to pay back the loan, 10 of the respondents with a percentage of 24% said it was easy to pay back the loan, majority of the respondents a total number of 18 and a percentage of 43% said it was difficult to pay back the loans while another number of 14 respondents with a percentage of 33% said it was very difficult to pay back the loans they obtained from pride microfinance limited due to reasons such as short period of paying back the loan, the interest rates charged on the loans borrowed do no favour a big number of the borrowers to mention but a few.
Table 4.16: Shows whether their incomes improved after getting some services from pride microfinance limited-Arua Branch Response Frequency Percentage (%) Very much 15 36 Slightly improved 18 43 Remained the same 6 14 Reduced 3 7 Total 42 100 Source: primary data. According to the table above, 15 of the respondents out of the 42 representing 36% agreed that after receiving services from pride microfinance limited, their
35 incomes improved very much, the majority who made a total of 18 with a total percentage of 43% agreed that their incomes slightly improved, 6 respondents representing 14% believed that their incomes remained unchanged after utilizing the pride microfinance limited loan while 3 respondents representing 7% agreed that their incomes reduced after utilizing the loans hence a negative impact on their incomes.
The researcher however explained that the benefit that a person gets from a loan solely depends on where he/she utilizes the money and the purpose of utilizing the loan. In other words where the loan is invested matters a lot in improving the incomes of the borrower. Those clients who invest their loans in very productive businesses reap more than those who utilize it in some other none productive means such as payment of school fees, welfare among others which do not generate more incomes to boost the already existing one.
Table 4.17: Showing responses of employees on whether they educate clients on utilizing the services. Response Frequency Percentage Yes 20 48 No 8 19 Sometimes 14 33 Total 42 100 Source: primary data According to the table above, 20 employees/respondents agreed that clients are sensitized on how to utilize the services, while 8 of them said that they do not educate the their clients on the usages of these services and 14 of the respondents employees said that they sometimes educated or sensitize their clients about the usage of the loans although they do not do it every time.
36 Fig 4.9: Whether clients are sensitized about usage of the loans obtained.
■ Yes
■ No
Sometimes
Source: Primary data The pie chart above reveals that majority of the respondents who made a percentage of 48% agreed that the management of pride microfinance limited sensitize them about the usage of the loans they obtain although where the borrowers will invest these loans depend on their own choice. However, 33% of the respondents said they do not educate the borrowers all the time but they do so sometimes while 19% of the respondents said they never sensitize the borrowers on the usage of the loans they obtain.
Table 4.18: Opinion of employees on poverty reduction Response Frequency Percentage Yes 24 57 No 6 14 Some how 12 29 Total 42 100 Source: primary data.
37 According to the table above, the biggest number of the respondents who made a total of 24 and a percentage of 57% agreed that pride microfinance limited has helped to reduce poverty in Arua district as many people obtain loans to increase their incomes, 6 of the respondents who made a percentage of 14% however strongly disagreed that pride microfinance limited has helped to reduce poverty in Arua district and 12 other respondents who made a percentage of 29 said the services of pride microfinance limited have helped to slightly increase peoples levels of incomes and as a result, poverty has been reduced in the district of Arua.
it should however be noted that micro financial institutions such as pride microfinance limited play a big role in fighting poverty in all over the country through the provision of soft loans with longer grace period and as a result, the levels of income earnings of the people especially in Arua district has drastically improved in the past few years.
Table 4.19: Showing reasons why employees believe that poverty has somehow reduced. Response Frequency Percentage (%) Increased savings 13 31 Easy repayment of loan 9 22 More children going to school 6 14 Improved business 8 19 Many people becoming self employed 6 14 Total 42 100 Source: Primary data
According to the table above, 13 of the respondents who made a percentage of 31 % believed that poverty has reduced in Arua district because peoples savings have increased in the past few years, 9 of them who made a percentage of 22%
38 said the reduction in the district was shown by the easy and timely repayment of loans obtained from the financial institutions such as pride microfinance limited, 6 other respondents with a percentage of 14% said the going of more children to school is a sign of reduced poverty in Arua district, 8 of the respondents with a percentage of 19% said the improvement in their businesses is a sign of reduced poverty as they were able to expand them, and finally 6 other respondents with a percentage of 14% said the increasing number of self employed people in Arua district is a sign that poverty is being reduced in the district and the region of West Nile as a whole due to the services provided by the micro financial institutions such as pride microfinance limited.
Table 4.20: Showing responses of the respondents on how they rate services offered by pride microfinance limited, Arua branch Response Frequency Percentage Very good 10 24 Good 17 41 Need improvement 9 21 Bad 6 14 Total 42 100 Source: Primary data According to the table above, 10 respondents who made a percentage of 24% said the services offered by pride microfinance limited were very good, 17 who made a percentage of 41 said the services offered were good. However, 9 of the respondents said the services at pride microfinance limited needed to be improved while 6 other respondents with a percentage of 14 said the services provided by pride microfinance institution were bad.
39 Table 4.21: Showing responses on whether clients keep their money in pride microfinance e limited-Arua branch. Response Frequency Percentage Yes 32 76 No 10 24 Total 42 100 Source: Primary data Out of the 42 employees of pride microfinance limited-Arua branch who were randomly chosen to answer the questionnaires, 32 of them who represented a percentage of 32% said the clients keep money in the limited but on the other hand, 10 of the respondents who made a percentage of 24% disagreed that the clients keep their money in pride microfinance limited.
Table 4.22: Showing responses on whether their clients receive interests on their deposits. Response Frequency Percentage Yes 6 14 No 36 86 Total 42 100 Source: primary data According to the table above, majority of the respondents who made a percentage of 86% said those who deposit or keep their money in pride microfinance limited do not receive any interest on top of their savings, 6 of the respondents with the percentage of only 14% however said they receive interests on their savings.
4.4 Findings on problems encountered by the pride microfinance limited and clients in their bid to reduce poverty. There were so many challenges encountered by both the management of pride microfinance and the clients which were analyzed here under.
40 Table 4.23: Showing responses of problems encountered by the management of pride microfinance limited. Problem Frequency Percentage High level of defaulters 19 45 Shortage of cash to meet customers' needs 0 0 Multiple borrowing of customers 4 10 Coordination and monitoring problem 0 0 Competition with other financial institutions 8 19 High operational costs 5 12 Manual methods of entering transactions 0 0 Inactive Board of Directors 0 0 Some clients are inactive 2 5 Overworking 4 10 Total 42 100 Source: primary data. According to the table above, 19 of the respondents representing a percentage of 45% said the main problem they face is the high level of defaulters by the borrowers of the loans, while 4 of the employees representing 10% said that multiple borrowing by the clients is the major problem they were facing, 8 respondents who made a percentage of 19% said competition with other financial institutions is a big challenge to pride microfinance limited, 5 other respondents with a percentage of 12% said high operational costs is the main challenge they face as they are required to take service closer to the clients some of whom are located in the remote areas which are difficult to access by road, 2 of the respondents with a percentage of 5% said some of the clients who have accounts in pride microfinance limited take too long to make savings and as a result, their accounts are sometimes deactivated, 4 respondents with a percentage of 10% said over working is a big challenge to the employees as they have to work longer hours hence too much fatigue.
41 None of the respondents responded on shortage of cash to meet customers' needs, coordination and monitoring problem, manual methods of entering transactions and inactive Board of Directors and so they did not look at these factors as challenges to the management and the general performance or operation of pride microfinance limited.
Table 4.24 Problems encountered by the clients Problem Frequency Percentage High interest rates 15 36 Many other requirements needed 12 28 Short period of repaying the loans 10 24 Getting less than expected 5 12 Forcing clients to buy shares 0 0 Low dividends paid on shares 0 0 Total 42 100 Source: primary data. Out of the 42 respondents who answered the questionnaires, 15 of them representing 36% complained of high interest rates charges on loans while those who complained that the pride microfinance limited demand other requirements in place of collateral assets before obtaining the loan were 12 representing 28% of the total respondents, 10 clients making a percentage of 24% complained of short period of repaying the loans, 5 clients representing 12% said getting less than expected is the major problem. None of the clients said they have been forced to buy shares as well as having low dividends in shares.
42 CHAPTER FIVE SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction This chapter presents summary, conclusions and recommendations or suggestions basing on the study findings and according to the formalized objectives of the study.
5.2 Summary of findings The findings in chapter four were discussed in relation to specific objectives of the study and research questions as already mentioned in chapter one. The review of literature and were to examine services offered by pride microfinance limited-Arua branch that help to alleviate poverty, how clients utilize the these services to fight poverty and to identify problems met by pride microfinance limited-Arua branch and clients in their effort to reduce poverty
5.2.1 Bio data information of the respondents In chapter four, the study revealed that majority of the respondents were the females with 52% although the difference in the gender difference was not very much and 62% of the respondents were already married with only 14% still single. Most of the respondents fell in the ages 26-46 with 29%-33%. The most targeted respondents with the loan officers and farmers as they made a percentage of 29% and 33% respectively. Majority of the respondents at least had university education with 33% followed by those who reached secondary level who made 29%. Half of the respondents of 50% had spent at least more than 4 years at pride microfinance limited with their income levels being between 300,000 - 500,000 as indicated by the highest percentage of 33%.
43 5.2.2: Services offered and utilized by the employees and clients of pride microfinance limited-Arua branch. From table 4.10, provision of loan facilities and mobilization of savings were the major services provided and utilized at pride microfinance limited as they made a high percentage of 40% and 34% respectively. Some of the services offered at pride microfinance limited included advisory services as indicated by 10% of the respondents. Services such as monitoring and supervision, community mobilization and employment opportunities had a percentage of only 5% while provision of micro insurance and participation in social activities had no percentage at all. The study therefore revealed that the main services that the micro financial institutions offer best are the mobilization of the clients to do savings of their incomes and then provision of loan services to boost their income generating activities to support them in generating more incomes.
5.2.3: How clients utilize the services. Table 4 .11 indicated that 71 % of the respondents had ever got loan services from pride microfinance limited to boost their incomes while table 4.12 showed that the majority of employees and clients used the financial services they obtained from pride microfinance limited to either increase their business incomes and farming activities or start new ones as was represented by 33% and 38% of the respondents respectively who agreed that services are used to increase business trade and farming. But majority of the respondents said that it difficult to pay back these loans due to challenges such as shorter repayment period yet with higher interest rates. 38% of the clients said they pay back the loans through incomes they generate from their businesses while 29% agreed that they pay back their loans after selling their farm produce. As a result of these loans, 43% of the respondents said their incomes slightly improved while 36% said the loans improved their incomes very much. But it should be noted that the impact of the loan on the incomes of the borrowers depended mainly on the activities they invest it in.
44 5.2.4: Problems faced by Pride microfinance limited and the clients in their bid to reduced poverty. According to table 4.23, the main problems pride microfinance limited face in its bid to reduce poverty included the following; A high level of clients who borrow loans from this financial institution but end up not paying back the loan. The high level of loan defaulters is shown by 45% of the respondents agreeing with this fact as a major challenge. 10% of the respondents said that the major problem as multiple borrowing as people get loans from different financial Institutions and end up failing to pay back the loans as well as over working of the of the employees causing fatigue. Regarding competition with other financial institutions, 19% of the respondents looked at this factor as a major challenge they are facing given the big number of limited and micro financial institutions in Arua district. Only 5% of the respondents said some of the clients having accounts with pride microfinance limited were in most cases inactive as they take long to deposit and save money in their accounts. The respondents did not look at shortage of cash to meet the customer's needs, coordination and monitoring problem, manual methods of entering transactions and inactive Board of Directors as a challenge at all as none of them agreed with these factors as challenges.
To overcome these challenges, 48% of the employees said they educated their clients on how to utilize the services offered to them and as a result, poverty has been reduced in the district of Arua.
5.3 Conclusion The role of microfinance institutions such as pride microfinance limited on the reduction of poverty goes beyond financial support to include activities like educating clients on how they can utilize those loans to raise incomes. Though some impact has been made, there is a need to strengthen entrepreneurial development rather than just providing loan facilities and mobilizing savings without knowledge on how to invest money resulting in utilizing them for non- 45 profit making ventures and thus ending up defaulting, loans duration which is too short remains a hurdle which must be overcome and also interest rates must be user friendly. But also the micro financial institutions need to be helped in one way or another because it is the interest rates they charge that has to meet all the costs like insuring against those that default , meeting all operational costs and paying dividends and salaries to members.
5.4 Recommendations. All the branches of pride microfinance limited need to work hand in hand and establishes a form of credit reference bureau to safeguard against multiple borrowing which makes some people to default. These financial institution should not only rush clients but have to co-operate in fighting that vice. To safeguard human error, reduce on stress of overworking, and avoid data loss, pride microfinance limited needs to purchase good computers with efficient net working.
The government needs to come in and support the Microfinance limited or institutions as it can help them through provision of subsidies, tax holidays, fixing fair interest rates to mention but a few which can reduce on operational costs and enable them to lower interest rates to benefit the poor. Also it should strengthen laws on defaulters. Proper principles and laws streamlining the operation of Microfinance limited should be enacted and carefully monitored.
The Microfinance limited need to offer long-term credits to enable people make enough returns before paying back the loans.
Microfinance institutions need to increase their services to go beyond accepting deposits and giving loans to include activities like community mobilization, Entrepreneurial development which can increases people's ability to make money and become rich.
46 REFERENCES
Semikono (1998), Business Environment, Text and cases 12th edition, Himalaya Publishing House, Delhi.
Daily Monitor (2005) May 22nd, New Vision (2007) 1st October, New Vision (2005) 17th May.
Harvey Jack (1998), Modem Economics an Introduction for Business an introduction for Business and Professional Students, 7th edition Macmillan Press limited.
Joanne Ledger Wood (2002), Micro .finances and Business, 2nd edition, Macmillan London.
Lloyd Thomas (1997), Money Micro.finance and Financial Markets, Irwin McGraw-Hill Boston.
MFPED (1998), Key Economic Indicator S, Ministry of Finance Planning and Economic Development, Kampala Issue 35.
MFPED (2004), Poverty Eradication Action Plan 2004/2005-2007 /2008, Kampala December Issue, Background to the Budget 2002/2003 Kampala.
Mukasa Eric (2005), Economics Reforms, Volume 5, Kampala January Issue. New Vision April 17 (2003) and October 1st 2007
UNDP Report (2003) Uganda Promises, Performance and Challenges for Attaining the Poverty Eradication Action Plan (PEAP) and Millennium Amoka (1998) Report on Poverty Eradication. Robert (1997), Rugasira (2000)
47 APPENDIX A DATA COLLECTION INSTRUMENTS
(a) QUESTIONNIARES (i) FOR EMPLOYEES Dear respondent(s), I am Bakoru Zaitun Ramandan, a student of Kampala International University pursuing a Bachelor's Degree in Business Administration. I am conducting a research titled, "The microfinance institutions and poverty alleviation with a case study of Pride microfinance limited, Arua branch." This research is purely for academic purposes, all the information given will therefore be treated with utmost level of confidentiality and privacy and the consent and anonymity of the respondent will be observed.
SECTIONS A: Employee introductory data Tick the appropriate answer (✓ I 1. Sex/ Gender (a) Male (b) Female
2. Marital status (a) Married CJ (b) Single (c) Divorced CJ
3. Age in years (a) 18-25 CJ (b) 26-36 CJ (c) 37-46 CJ (d) Above 47 CJ
4. Academic qualifications (a) Certificate CJ (b) Diploma CJ (c) Degree CJ (d) Masters (e) Other professional course ...... CJ 48 5. Which department do you belong to? (a) Finance ~ (b) Loan ~ (c) Administration ~ (d) Others ......
6. Position held in this Microfinance Institution (a) Manager ~ (b) Loan officer ~ (c) Accountant ~ (d) Cashier ~ (e) Others (Specify) ......
7. How long have you served in the institution? (a) Less than a year ~ (b) 1 to 2 years ~ (c) 2 to 4 years ~ (d) Above 4 years ~
SECTION B: Service offered by Pride microflnance-Arua Branch Please tick where applicable ( ✓ l 8. What types of services do you offer to your clients? Strongly Agree Not Disagree Strongly agree sure disagree Mobilizing savings Advisory services Monitoring and supervision Micro insurance Community mobilization Employment opportunities Others specify
49 9. Which of the above services do your clients utilize most? Strongly Agree Not Disagree Strongly agree sure disagree Mobilizing savings Advisory services Monitoring & supervision Micro insurance Community mobilization Employment opportunities Others specify
10. Which groups of people normally utilize the services listed in 6 above? Strongly Agree Not Disagree Strongly disagree agree sure Farmers Traders Men Women Employed Unemployed Others specify
50 SECTION C: How the services are utilized. 11. How do the clients utilize the services listed in 5 above? Strongly Agree Not Disagree Strongly agree sure disagree Increase business income for domestic welfare Increase farming Cater for emergencies Others specify
12. Do you normally visit your clients to educate them on how to utilize the services? Strongly agree Agree Not sure Disagree Strongly disagree
13. Give reasons for your answer in 10 above Strongly Agree Not Disagree Strongly agree sure disagree Increase in savings Clients easily paid back loans More children have gone to school Businesses have improved Clients have constructed residential houses Many people have become self employed Others specify
51 SECTION D: Problems faced at Pride Microfinance Institution, Arua Branch
Please tick where applicable ( ✓ I 15. State the problems met at Pride microfinance, Arua branch in attempt to alleviate poverty. Strongly Agree Not Disagree Strongly agree sure disagree High levels of defaulters Shortage of cash flow to meet the demands of clients High interest rates in case of borrowing from other institutions Coordination, monitoring and supervision problems Competition from other institutions High operational costs Others specify
THANK YOU AND MAY GOD BLESS YOU ABUNDANTLY
52 (ii) QUESTIONNIARE FOR THE CLIENTS OF PRIDE MICROFINANCE LIMITED, ARUA BRANCH
Dear respondent(s), I am Bakoru Zaitun Ramandan, a student of Kampala International University pursuing a Bachelor's Degree in Business Administration. I am conducting a research titled, "The micro.finance institutions and poverty alleviation with a case study of Pride micro.finance Limited, Arua branch." This research is purely for academic purposes, all the information given will therefore be treated with utmost level of confidentiality and privacy and the consent and anonymity of the respondent will be observed.
SECTIONS A: Client Introductory Data Tick the a1niropriate answer 1. Sex/Gender (b) Male c=i (b) Female
2. Marital status (a) Married c=i (b) Single (c) Divorced c=i
3. Age in years (b) 18-26 c=i (c) 27-36 c=i (d) 37-46 c=i (e) Above 47 c=i
4. Academic qualifications (a) Certificate [=i (b) Diploma c=i (c) Degree c=J (d) Masters c=J (e) Other professional course ......
53 4. Occupation (a) Peasant [==i (b) Civil servant [==i (c) Trader [==i (d) Farmer [==i (e) Others (Specify) ......
5. What do you estimate to be your monthly level of income? (a) Below 100,000/= [==i(b) Between 100,000 to 300,000/=[==i (c)Between 300,000/= to 500,000/= [==id) Above 500,000/=
SECTION B: Services got from Pride microfinance Arua branch Please tick where applicable ( ✓ I 6. What services do you receive from Pride microfinance Arua branch? Strongly Agree Not Disagree Strongly agree sure disagree Mobilizing savings Advisory services Monitoring and supervision Micro insurance Community mobilization Employment opportunities Others specify
7. Have you received a loan from the above institution?
54 8. If your answer in 7 above is yes, how easy was it to get? IVo,y my IEa,y Illilncult IVo,y dUI",cult
9. What had you applied a loan for Strongly Agree Not Disagree Strongly agree sure disagree To boost farming To pay school fees To do a business To construct a house To pay debts To buy land Others specify
SECTION C: Application of the services Please tick where applicable ( ✓ l 10. If you received a loan, how did you use it: Strongly Agree Not Disagree Strongly agree sure disagree To boost farming To pay school fees To expand or start business To construct a house To pay debts To buy land Others specify
55 11. If you paid back, from where did you raise the money to pay back the loan? Strongly Agree Not Disagree Strongly agree sure disagree Farming Salary Sold some property Employment income From other financial institutions Others specify
12.Was it easy to pay back the loan? Strongly Agree Not Disagree Strongly agree sure disagree Very easy Easy Difficult Very difficult
13.Has your income increased after getting a loan from Pride microfinance, Arua Branch? Strongly Agree Not Disagree Strongly agree sure disagree Very much Slightly improved Remained the same Reduced
56 14. How do you rate Pride microfinance loans on poverty alleviation? Strongly Agree Not Disagree Strongly agree sure disagree Very good good Need for improvement
15.Did you keep your money with Pride microfinance, Arua Branch?
SECTION D: Problems encountered in dealing with Pride microfinance. Please tick where applicable ( ✓) 16.What problems do you encounter when dealing with Pride microfinance? Strongly Agree Not Disagree Strongly agree sure disagree High interest Many other charges Difficulty 1n accessing money on savings account Getting less than expected Short period for paying back Bad treatment by Microfinance employees Others specify
THANK YOU AND MAY GOD BLESS YOU ABUNDANTLY
57 (b) INTERVIEW GUIDE (i) Interview guide for employees 1. Can you briefly tell me about yourself about the following? a) Age b) Marital status c) Academic qualifications d) Department you belong to in this financial institution? e) Position you hold f) Number of years you have served in this financial institution
SECTION B: Service offered by Pride Microfinance-Arua Branch 2. What types of services do you offer to your clients? 3. Which of the above services do your clients utilize most? 4. Which groups of people normally utilize the services listed above? 5. How do the clients utilize the services listed above? 6. Do you normally visit your clients to educate them on how to utilize the services? 7. In your opinion, has Pride Microfinance, Arua branch helped to reduce poverty? 8. Give reasons for your answer above. 9. State the problems met by Pride Microfinance, Arua branch in attempt to alleviate poverty.
58 (ii) Interview guide for clients of Pride Microfinance, Arua branch. 1. Can you briefly tell me about yourself about the following? a) Age b) Marital status c) Academic qualifications d) Your occupation e) Your monthly level of income? SECTION B: 1. Services got from Pride Microfinance Arua branch.
2. What services do you receive from Pride Microfinance Arua branch?
3. Have you received a loan from the above institution?
4. If your answer in 7 above is yes, how easy was it to get?
5. What had you applied a loan for?
6. If you received a loan, how did you use it?
7. If you paid back, from where did you raise the money to pay back the loan?
8. Was it easy to pay back the loan?
9. Has your income increased after getting a loan from Pride Microfinance?
10. How do you rate Pride Microfinance loans on poverty alleviation?
11. Did you keep your money with Pride Microfinance, Arua Branch?
12. What problems do you encounter when dealing with Pride Microfinance?
THANK YOU AND MAY GOD BLESS YOU ABUNDANTLY
59 APPENDIXB THE TIME FRAME OF THE STUDY
:TIVITIES OR STAGES IN FEBRUARY MARCH2013 APRIL2013 [E RESEARCH PROCESS 2013 :ntifying the research topic :ntifying the research iblem termine how to conduct or TY out the research data llection of research data alyzing and interpreting the :a iting the research report :>mission of research report SOURCE: From the researcher.
60 APPENDIXC BUDGET FOR THE STUDY
ITEMS AMOUNT (SHS) The cost of stationary: Pens, files, Sets, rulers, Ream papers 25,000 The cost of computer use 80,000 Travel and communication expenses for distribution of 100,000 questionnaires Subsistence allowance, for examples, 50,000 Breakfast and Lunch Contingent 50,000 TOTAL 305,000
61 I t