Contribution of Micro-Finance on Socio-Economic Development of Rural Community

Abstract

ABSTRACT

Microfinance Services and the Clients’ Socioeconomic Wellbeing During the Covid-19 Pandemic in Uganda

“…The paper sought to establish if microfinance services had any relationship with the clients' socioeconomic wellbeing during the Covid-19 pandemic and the results, in general, indicate that among the microfinance services studied, the client protection policies are a significant predictor of clients' socioeconomic wellbeing when compared to the microfinance social services. The correlation results indicated that microfinance social services do not lead to improved clients' socioeconomic wellbeing contrary to earlier findings of studies done by (Kamiza & Kizza, 2019;Dhakal & Nepal, 2016;Al-Shami et al, 2014;Mokhtar, 2011;Kizza & Ssekibaamu, 2019). The non-significant relationship between microfinance social services and the clients' socioeconomic wellbeing may be explained when we make an analysis of the adoption of the virtual workspace that some MFIs have adopted to reach out to the clientele yet the majority of the clientele are not accustomed to the use of virtual tools.…”

“…The point of contention is whether the social efficiency of MFIs can translate into a positive socioeconomic impact on the marginalised and vulnerable groups. Dhakal and Nepal (2016) investigated the contribution of microfinance to the socioeconomic development of a rural community in the Syangja district following a quantitative approach and a cross-sectional study design. The respondents were purposively selected and the perceptual analysis revealed that microfinance significantly contributes to social change and development.…”

“…Hamdan et al (2012) underscore the need for MFIs to provide non-financial services to the clients in the form of entrepreneurial and business skills training to enable them effectively utilise the accessed funds. Clients trained in entrepreneurship and financial literacy may not only create more job opportunities but their ability to honour their loan repayment schedules will improve, and where women are involved, it will promote women entrepreneurship (Al-Shami et al, 2014;Darin-Mattsson et al, 2017;Kåreholt, 2017;Mayoux, 1999) The socioeconomic impact of microcredit is to lead to changed lives where the vulnerable gain societal respect, gain self-employment, can afford adequate housing, pay for their children health and medical bills, good feeding, increased participation in decision making, happy and stable families, improved self-esteem of the marginalised, and widened life choices including enjoyment of leisure opportunities (Dhakal & Nepal, 2016). The loan services offered to the marginalised are known to be more impactful to the client's wellbeing if offered in time with a flexible loan repayment period, with loan terms made clear to the client and at an affordable interest rate (Al-Shami et al, 2014).…”

“…The poor continue to seek out these highly-priced loans, as this is their only plausible option given the reluctance of commercial banks to advance credit to the poor due to their lack of collateral. The social efficiency of MFIs is said to improve during crisis situations as the MFIs are motivated to reach out to the very poor through the provision of microloans, albeit at high-interest rates (Zheng & Zhang, 2021;Dhakal & Nepal, 2016). The high lending rates have been justified not only as a solution to the high cost of lending experienced by MFIs but also as an enabling mechanism for the MFIs to expand their outreach to the vulnerable groups.…”

“…Microfinance institutions (MFIs) are socially oriented organisations that offer non-collateralised microcredit to the vulnerable and marginalised groups usually excluded from formal financial institutions. Microfinance has been advocated for as a viable alternative to reach out to the very poor and marginalised groups that are often excluded from accessing finances from the more formalised financial institutions (Busingye & Kazooba, 2018;Al-Shami et al, 2014;Dhakal & Nepal, 2016;Kamiza & Kizza, 2019). MFIs pursue a dual objective of achieving the social mission while at the same time earning some profits to be able to break even (Zamore et al, 2019;Zheng & Zhang, 2021;Sinha, 2006;Bauwin, 2019).…”