The effect of micro finance institutions on increasing peoples’ economic empowerment: Case Study – Hofokam microfinance institution Kahoora Division in Hoima Municipality

Abstract

Due to the increasing financial services offered by most microfinance institutions in Uganda in both urban and rule areas to women and men, a study was conducted to assess, the effect of microfinance institutions on increasing people’s economic empowerment in Kahoora division- Hoima municipality. The study was guided by the following research objectives: to establish the contribution of microfinance institutions on increasing people’s economic empowerment; to assess the challenges facing microfinance institutions on increasing people’s economic empowerment and to devise some strategies that micro finance institutions can use to enhance people’s economic empowerment. The researcher used both primary and secondary data to compile this report. The primary data was obtained from former clients of different micro finance institutions and officials (employees and officials) from different micro finance institutions. The primary data was obtained through the use of questionnaires and interviews Secondary data was obtained from magazines, textbooks, journals, newspapers, internal reports of different MFIs, internet among others. The study revealed that MFIs have contributed to a lesser extent in offering financial support to the people to increase on their economic empowerment. It was noted that these MFIs have various challenges affecting their performance in trying to increase on people’s economic empowerment, these include insufficient collateral security by their clients, high charges imposed on them by the central Bank, multi borrowing by their clients, poor record keeping by their clients among others. It was revealed that several strategies were to be formulated like encouraging clients to get group loans instead of individuals, teaching their clients dangers of multi borrowing among others. The study came up with several conclusions among them is that micro finance institutions contribute to some extent on increasing people’s economic empowerment through giving them business support; there are several challenges facing MFIs the major one being high charges imposed on them by the central bank. The study made the following recommendations; the central Bank lower the charges in order for these MFIs to lower the interest rates imposed on clients, lengthen the grace period, sensitize clients on the dangers of multi borrowing if they are to benefit from their financial services.