Microfinance services and living standards in Burundi

Abstract

Microfinance services have been identified as developmental tools, aimed at reducing poverty by bringing significant improvement in the living standards of the vulnerable people in society. The principal objective of the microfinance program is to provide skills and opportunities for the poor to access financial services permitting them to engage in various income-generating projects, thereby improving their welfare. This study sought to examine the effect of microfinance services on the living standards of low-income earners in Ngozi province of Burundi. The objectives of this study were to examine the effect of loans on the living standards, to assess the effect of savings on the living standards, and to examine the effect of trainings on the living standards improvement in Ngozi province, focusing on the services of Twitezimbere Microfinance to its clients. A conceptual framework developed by Dwight and Lieden (2013) was modified for this study to give a theoretical explanation on the relationship between loans, savings and training with living standards. Both qualitative and quantitative data were collected using the interview and questionnaire methods. A survey design was also used and a structured questionnaire was designed on a five point Likert scale and distributed to 156 respondents that were selected from a target population of 255 respondents using purposive sampling technique. Collected data was processed using the Statistical Package for Social Sciences (SPSS, version 16). The study findings were analyzed and presented in tables using frequencies, percentages, mean and standard deviations. Pearson’s correlation analysis was used to conclude on the relationship and the level of significance between dependent variables and independent variables. Regression analysis model was also used to assess the extent to which independent variables predicted variance into the dependent variables. The study revealed that access to microfinance services such as loans, savings and trainings has led to improvement in the living standards of the clients of Twitezimbere Microfinance in the areas of healthcare, nutrition and sanitation, housing as well as improved incomes. This was indicated by a moderate positive relationship between loans offered by Twitezimbere Microfinance to its clients with (R = 0.471, P=0.000) at a significance level of 0.01.The study showed also a moderate positive relationship between savings with Twitezimbere and living standards with (R= 0.522, P= 0.000). The study showed a weak positive relationship between trainings of Twitezimbere microfinance and living standards to its clients indicated by R=0.390 and P=0.000. Finally it indicated that in terms of living standards, savings is considered as the highest predictor (β=0.310) followed by loan (β=0.224) while training had less significant force (β =0.181). Consequently, it is concluded that microfinance services have a positive and a significant effect on the living standards in Ngozi Province. The microfinance services have not only helped clients of Twitezimbere to overcome their socio-economic challenges, but have helped them to get empowered. The study recommends MFIs operating in Burundi, especially Twitezimbere Microfinance, to undertake several trainings on financial management courses so that clients can learn the best financial management skills and thus improve their businesses which lead to higher income hence leading to improved living standards in Ngozi Province.