The effect of financial literacy on the economic development of clients of microfinance institutions; Case study; Hofokam Limited Kasese branch

Abstract

The study was set to find out the effect of financial literacy on the economic development of clients of microfinance institutions. Balunywa (2012) alleged that microfinance institutions are indeed playing a key role in promoting financial inclusions in Uganda. The Finscope study (2013) also revealed that the development of the financial sector has not benefited all socioeconomic groups, adding that 26% of Uganda’s total population does not access financial services from either formal or informal service providers. This study was meant to establish the effect of financial literacy on the economic development of clients of microfinance institutions and the objectives were to establish the effect of proper finance planning methods on the economic development of clients of microfinance institutions in Kasese district, to examine the role of personal financial management skills on the economic development of clients of microfinance institutions and to assess the effects of development of saving culture on the economic development of clients of microfinance institutions in Kasese district. The researcher used a case study research designs, qualitative and quantitative research approaches were also used, and these provided a deeper analysis of the variables under study. The researcher used different research tools such as questionnaires and interview guides in order to acquire relevant information necessary for the study. The research findings indicated that microfinance institutions in Kamaiba village had more female clients than the males and the difference was 8%. The findings further indicated that there was a link between financial literacy and the economic development of clients of microfinance institutions, implying that financial literacy has an effect on the economic development of clients of microfinance institutions. Basing on the findings of the study, the researcher recommended that government should focus on programs that will increase financial knowledge among members of the public. The government should further develop policies that encourage development of saving culture across the population.