The contribution of microfinance institutions in the eradication of poverty in urban areas

Abstract

This paper sought to investigate and analyse the contribution of microfinance institutions in the eradication of poverty in urban areas. This paper was based on how microfinance institutions have in different ways contributed towards poverty eradication in urban areas. Microfinance is usually understood to entail the provision of financial services to micro entrepreneurs and small businesses, which lack access to banking and related services due to the high transaction costs. For the microfinance institutions to eradicate poverty in urban areas they had to investigate the challenges and the problems faced by people in urban areas and discover the goals and activities to be achieved to eradicate poverty. These institutions had to extend credit or loans to aid people in urban areas. Data was collected using questionnaires distributed to both management and the clients of these institutions. This study was basically aimed at the following objectives; to establish how loan conditions affect borrowers’ ability to pay, establish the challenges being faced by microfinance in relation to loan recovery, establish how microfinance institutions had tackled the developmental challenges such as unemployment and poverty and find out whether people with good ideas to invest in profitable businesses have access to money from these institutions. The findings revealed that Pride Microfinance Institution has in deeded done its best to eradicate poverty in urban areas, by making it easy for the clients to access loans, these loans have been effective to the clients. Pride Microfinance institution was able to control the rapid growth of unemployment and poverty through the setting up of small businesses for the people in Nakawa thus the eradication of poverty. However, ineffectiveness was also revealed where a few of the clients of the institution were complaining about some of the employees’ unfavorable attitude towards them. The employees judged the clients based on appearance. This became a threat to the institution because this threatened the loss of some clients. In light of the following, recommendations were made to the institution. Employees should improve their relationship with the clients especially the illiterate and the poor. This should be done by receiving each and everyone in his/her caliber. The institution should also revise its interest rates and make sure that they favor their clients, sensitise its clients about the importance of saving