Microfinance services and financial performance of rural households in Uganda

Abstract

The study set out to examine the effect of microfinance services on financial performance of the rural households in Uganda a case of pride microfinance customers. It was guided by the study objectives which included; To find out the effect of microcredit on financial performance of the rural households in Uganda, To find out the effect of entrepreneurship training on financial performance of the rural households in Uganda and To find out the effect of savings on financial performance of the rural households in Uganda. The study adopted a cross sectional research design, were qualitative and quantitative approaches were used. A sample size of 127 was drawn from the total population of 187 Pride Microfinance customers in Bungokho Sub-County Mbale district. Stratified and purposive sampling techniques were used in selecting the respondents for the study. Primary and secondary data sources were used in the compilation of this research; primary data was gathered using questionnaires and interviews, while secondary data was gathered from reading text books, journals, magazines and internet. Quantitative data was fed into SPSS (25) software program that generated frequencies, percentages, correlations and regression tables. The data was then manually analyzed by the researcher. The findings revealed that there was a positive and significant relationship between microcredit and financial performance of the rural households at (r) = .705**, P = .000 significant at the 0.01 (2-tailed) given by the Pearson correlation. There was a positive and significant relationship between entrepreneurship training and financial performance of the rural households at (r) = .595**, P = .000 significant at the 0.01 level (2 tailed) given by the Pearson correlation. There was a positive and significant relationship between savings and financial performance of the rural households at (r) = .729**, P = .000 significant at the 0.01 level (2-tailed) given by the Pearson correlation. In addition, the model summary results gave an Adjusted R-Square result 0.546 which implied that microcredit, entrepreneurship training and savings, explained 54.6% variation in financial performance of rural households, while the remaining 45.7% variation in financial performance of rural households was explained by other factors that were not studied. The study recommended that; there is need to provide an enabling environment for rural households to grow and thrive financially, thus needs there is need to develop strategies to enhance increased access to micro credit by the rural households through microfinance institutions. It is important for the government to set up policies that will ease microcredit services provision to the rural population. In addition, the whole package of entrepreneurship training should be offered to the rural poor before they are encouraged to go ahead and borrow any money for development if they are to realize financial performance. There is need to adopt the VSLA module if we are to realize better financial performance among our rural households because it encourages savings