Evaluating the determinants of access to microfinance loans in Uganda

Abstract

The aim of this study was to evaluate the determinants of access to microfinance loans in Uganda, a case study of ATC SACCO Adjumani District. The specific objectives of the study were, to examine the influence of collateral securities on the access to microfinance loans, to assess the influence of interest rates on the access to microfinance loans and to find out how savings influence access to microfinance loans in Uganda. The study used a cross-sectional case study design and both a quantitative and qualitative approach was used for the study. The study also employed a scientific model of Krejice and Morgan (1970) to determine the sample of the study which was 80 respondents including both staff members and the clients of the SACCO. The study used self-administered questionnaire and interviews to collect the data and analysis was done using SPSS and Pearson’s correlation analysis was employed to determine the relationship between the variables. The findings from the correlation analysis indicate that, there is a positive correlation between collateral security and savings and access to microfinance loans and a negative correlation between interest rates and access to microfinance loans. The study therefore concludes that, microfinance institutions require collateral security as they extend their loans to clients, microfinance institutions charges appropriate interest rates on their loans and this interest does not discouragethe clients from accessing loans and also savings with the MFIs enable access to MFIs loans. The study therefore recommends the microfinance institutions to emphasize the use of social capital which is based on trust and networking as collateral security instead of requiring economic collateral security, reduce the amount required for each member to save and state the number of shares a client is to hold in order to access financial support and alsopay a keen attention on the clients’ loan repayment patterns as it’s from judging the loan repayment performance that they can set more appropriate interest on the loans being offered. Key Terms:Access to Loans,Microfinance institutions, Savings and Credit Cooperatives, Interest rate, Collateral security, Savings.