The Impact of Microfinance on Poverty Eradication and Economic Development Among Youth in Uganda A Case Study of Summit Capital Microfinance, Kabalagala Branch

ABSTRACT 

The purpose of the study was to investigate the impact of microfinance on poverty eradication and economic development among youth in Uganda. The study was based on the following 3 objectives; (I) to assess the services offered by microfinance towards poverty eradication and economic development among youth in Uganda; (ii) to examine the level of poverty eradication and economic development in kabalagala; and (iii) to establish the impact of microfinance on poverty eradication and economic development among youth in Uganda. The study employed a cross-sectional research design and a sample size of 100 respondents from a target population of 133 was used for the study. In regard to services offered by microfinance towards poverty eradication and economic development among youth in Kabalagala; the study found out that services offered by microfinance among youth in kabalagala was rated high with average mean (mean = 3.87) and were membership services, saving services and loan services which were all rated high by average mean of 3.88, 3.92 and 3.82 respectively. Study findings revealed that it is not complicated to become a member of the microfinance (mean = 3.64); share value is affordable (mean = 4.09); requirements to open account are easy to fulfill (mean = 3.84); saving policies for microfinance are well set (mean = 3.85); members get their savings on demand (mean=3.93); minimum liquidity are maintained to serve members (mean = 4.03); microfinance offers loans to members at affordable interest rates (mean = 4.05); loan repayment period is long enough (mean = 3.67); and collateral required is affordable (mean = 3.94). In regard to level of poverty eradication and economic development in kabalagala; results indicated that level of poverty eradication and economic development in Kabalagalawas high with average mean of 3.92; findings revealed that youth in Kabalagalahave managed to generate savings for future investment (mean = 3.78); resources pooled by youth have been put in investment (mean = 3.94); youth have access to loans and put this into investments (mean = 3.94). In regard to the impact of microfinance on poverty eradication and economic development among youth in Kabalagala; the study found out that the Pearson’s r data analysis of correlation revealed a +0.858 and thus, the findings revealed that there is a positive statistical significance impact between microfinance and poverty eradication and economic development among youth in Kabalagala. The study concluded that; microfinance have positively contributed to the poverty eradication and economic development among youth in Uganda. The study showed that microfinance services or activities mainly membership, credit and saving products have a positive contribution to poverty eradication and economic development among youth in Uganda. The study recommended that; Microfinance should encourage its members to improve on their current level of education by engaging in adult education or life-long learning as this will have the potency to increase their level of income; Microfinance should seek long term capital from local market which will enable them to grant larger volume of loan and to greater number of people who will improve their outreach level; again microfinance should design appropriate products that are flexible enough to meet the different needs of the poor for both production and consumption. The government should subsidize loans for poor people to make the loans more affordable for clients, keep assisting microfinance in saving mobilization to increase loanable fund, assist microfinance in training members on loan utilization, saving culture and business.

TABLE OF CONTENTS

DECLARATION

APPROVAL ii

DEDICATION

ACKNOWLEDGEMENT iv

LIST OF ACRONYMS v

LIST OF FIGURES vi

LIST OF TABLES

TABLE OF CONTENTS viii

ABSTRACT

CEIAPTER ONE  1

INTRODUCTION ...... 1

1.0 Introduction 1

1.1 Background to the study 1

1.2 Statement to the problem 4

1.3 Purpose of the study 4

1.4 Research objectives 4

1.5 Research questions 5

1.6 Scope of the study

1.6.1 Geographical scope 5

1.6.2 Content scope 5

1.6.3 Time scope 5

1.7 Significance of the study 5

1.8 Definitions of variables 6

2,2 Conceptual framework 7

Figure 2.1: Conceptual framework of microfinance and poverty eradication and economic development 7

CHAPTER TWO ............................8

LITERATURE REVIEW................................8

2.0 Introduction .8

2.1 Theoretical framework 8

2.1.1 Social capital theory 8

2.1.2 Cumulative and cyclical interdependencies 10

2.2 Concept of microfinance 11

2.3 Concept of poverty 13

2.4Concept of poverty eradication 13

2.5 Economic development 14

2.6 Microfinance industry of Uganda 15

2.7 Services offered by microfinance 16

2.8 Contributions of youth groups on poverty eradication and economic development 17

2.8.1 Savings 17

2.8.2 Pooling resources for investment 17

2.8.3 Access to loans for investment 18

2.8.4 Income from own business 18

2.8.5 Literacy 18

2.8.6 Managing natural resources 19

2.9 Empirical evidence of the impact of microfinance and poverty reduction 19

2.1O A critique on interest-based microfinance 22

CHAPTER THREE ~ ...

METHODOLOGY.................. 26

3.0 Introduction 26

3.1 Research design 26

3.2 Target population 26

3.3 Sample size 27

3.4 Sampling techniques 27

3.5 Data collection instruments 28

3.6 Validity and reliability of the instrument 28

3.7 Data gathering~29

3.8 Data Analysis

3.9 EthIcal considerations........... ........................~..... 30

CHAPTER FOUR ~

PRESENTATION, ANALYSIS AND INTERPRETATION OF FINDINGS........31.

4.0 IntroductIon ........................................................................................~31

4.1 Demographic factors lnlbrniatlon of the respondents . . . .. . . . . . . . . . . . . . . . . ..32

4.1.2 Purpose ofjoining microfinance ..................................................~....34

4.1.3 Source Have you of taken Initial capital Loan front

4.2 Descrlpttve statistics on research variables ............................................~.3g

4.2.1 DescrIptive statistics on services offered by Mlcrofinance among youths In Kabalagala ••••••••••••••••••••...........•............•..................39

4.2.2 DescrIptive statistics on level of poverty eradication and economic

4.2.3 Impact of microfinance on poverty eradication and economic development among youths of Kabalagala

CHAPTER FIVE ...................,..................46

DISCUSSION OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS*

5.1 To assess of the findings services offered by microfinance towards poverty eradication and economic development among youths In Kabalagala........’......_...4~

5.2.2 To examine the level of poverty eradication and economic development In l(abalagala .... . . ...

5.2.3 To establish the Impact of mlcrofinance on poverty eradication and economIc development among youths In Kabalagala ............................~47

5.3 Conclusions of the study~ 48

5.4 Recomniendations~

5.5 Areas for future research 49

REFERENCES................. 51

APPENDICES 53