THE EFECTS OF MICROFINANCE LOANS ON LOW INCOME HOUSEHOLDS IN KASHARI COUNTY

TABLE OF CONTENTS

DECLARATION .............................................................................................................................. i

APPROVAL .............................................................................................................................. ii

DEDICATION ................................................................................................ iii

ACKNOWLEDGEMENTS ...................................................................................................... iv

'fABLE OF CONTENTS ........................................................................................................... V

ABSTRACT ........................................................................................................................... viii

CI-IAPTER ONE ........................................................................................................................ 1

1.0 INTRODUCTION ........................................................................................................... I

1.1 Background of study ........................................................................................................ 1

1.2 Statement of the problem ................................................................................................. 2

1.3 Purpose of the study ........................................................................................................ 2

1.4 Objectives of the study .................................................................................................... 3

1. 5 Research questions .......................................................................................................... 3

1.6 Scopeofthestudy ........................................................................................................... 3

1.6. Content scope ....................................................................................................................... 3

1.6. Geographical scope ............................................................................................................... 3

1.6.3 Ti1ne scope ............................................................................................................................ 3

1. 7 Significance of the study .................................................................................................. 4

1. 8 Conceptual Framework .................................................................................................... 4

1. 9 Theoretical Fra1nework ..................................................................................................... 5

CI-IAPTER TWO ....................................................................................................................... 7

LrfERA TURE REVIEW ........................................................................................................... 7

2.0 Introduction ..................................................................................................................... 7

2.1 Micro finance institutions ................................................................................................. 7

2.2 Evolution of 1nicrofinance ............................................................................................... 8

2.3 The concept of microfinance in Uganda ........................................................................... 9

2.4 Objectives of the Micro-finance institutions in Uganda .................................................... 9

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2. 5 Government policy on MFis ........................................................................................... 10

2.6 Fonn of micro-financing ................................................................................................. 10

2. 7 Lending 1nethodology ..................................................................................................... 11

2.8 Loan size and duration .................................................................................................... 11

2. 9 Importance of credit loan in economy ............................................................................. 11

2.10 Standard of living ........................................................................................................ 12

2.11 Factors that hinder the standard of living ..................................................................... 14

2. 12 Measure of poverty and standard of living ......................................................................... 15

2.13 Relationship between MFis and standard of living ...................................................... 16

CI-IAPTER THREE .................................................................................................................. 17

METHODOLOGY ................................................................................................................... 17

3. 0 Introduction ........................................................................................................................ 17

3.1 Research Design .................................................................................................................. 17

3 .2 Study Population ................................................................................................................. 17

3. 3 Sa1np ling procedure ............................................................................................................ 18

3.4 Sa1nple Design .................................................................................................................... 18

3 .5 Sa1nple size ......................................................................................................................... 19

3.6 Data Collection Instruments ................................................................................................ 19

3. 7 Data Analysis Techniques ................................................................................................... 21

3.8 Limitations of the study ....................................................................................................... 22

CI-IAPTER FOUR ......................................................................................................................... 23

PRESENTATION, ANALYSIS AND INTERPRETATION OFTHE FINDINGS ..................... 23

4.0 Introduction .............................................................................................................................. 23

4. l Infonnation on the respondents ............................................................................................... 23

4.1.1 Response rates ...................................................................................................................... 23

4.1.2 Age of the respondents ......................................................................................................... 24

4.1.3 Nature of micro-financing institutions ................................................................................. 25

4.2 Findings on how MFis support low income households in Kashari County ........................... 26

4.2.1 Special facilities provided to low income household in Kashari County ............................. 26

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ABSTRACT his study intended to show the effects of microfinance loans on low income households. It was

one in Kashari County, Mbarara, Uganda. The study aimed at finding out how the microfinance

1stitutions have perfonned in extending and providing loans service to the rural population. A

umber of microfinance institutions have sprung to provide the needed service to improve the

usiness of beneficiaries.

fowever, their growth period recovery is short and of high interest rate This unable ineffective use

)f the loans by low income households putting the standard of living at stand still This trend of

>ersistent low standards of living in Kashari County is the basis of this research. the study

rhe objectives of the study included the following; to establish the nature of loans given by

nicrofinance, to find out the loan policies in microfinance institutions in and to establish the

·elationship between microfinance loans and the standard of living of low income households in

Kashari County.

rhe study employed a across-sectional research design (Ranjit 1996: 81) which includes both

survey and ethnographic methods. Using this research design, data will be collected from more

than one respondent in Kashari County at a single point in time. The design enabled the research

to examine the diversity within the rural and urban credit users. It further enabled the research to

triangulate between the quantitative survey questionnaires and the qualitative FGDs and key

informants interviews.

The findings of the study revealed that MFis and MF loans have plans to improve beyond areas of

Bwizibwera, Rubindi and cover more rural areas like Kagongi, Rwanyamahembe, Bubaale subcounties

and others. The researcher also found out that some people got the loan but did nothing

that could bring in development, for instance some used it for gambling.

Recommendations were given and this included; it should establish infonnation and advisory

centers to train low income households in their various business. Apart from recommendations got

as a result of the study, they should also carry seminars or workshops to educate people on the

importance of acquiring loans and how they can use it effectively for personal development.

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