The Role of Microfinance Instituitions on Performance of Small Scale Farmers Case Study of Finca Clients in Mbarara District

Abstract

This study assessed the effect of microfinance towards the performance of small scale farmers basing on clients of FINCA Mbarara as the case study. The specific objectives of the study were:To examine the role of financial literacy on performance of small scale farmers in Mbarara district, To analyse the role of loan terms and conditions on performance of small scale farmers and to establish the role of loan mobilization on performance of small scale farmers in Mbarara District.

The study adopted the case study design with quantitative and qualitative research techniques. A total sample size of 50 respondents was used. Self-administered questionnaires and face to face interviews were used to collect data. Data was coded and later processed using Statistical Package for the Social Sciences (SPSS) computer program.

From the study it was revealed that conclusion it was observed that clients get small loans without serious collateral that help them to meet their financial needs and they have also acquired financial management skills hence they can now budget and better manage our investment skills. It was also discovered that clients can do well business plans, keep financial records which has influenced MFIs to easily give them loans without necessarily having to go through various prolonged processes.

From the study it was discovered that MFI’s have given clients the adequate loans at affordable rates, with little amount of security and are always given a period long enough to payback that covers the gestation period of their operations. It was also found that clients know various members who can guarantee them security to acquire MFI loans through the SACOs who know them from our locality and further more clients save the profits they get after paying off their loans with the MFIs to use in the coming seasons.

From the study it was found out that clients can now borrow the amounts they require without necessarily having much security and can easily raise money to pay back our loans since the loan weight is lowered from individuals to the whole borrowing group. It was also discovered that clients do not need to have strong character history since the MFIs’ consistent customers who know them better can give them bank guarantees and MFI bank intermediaries have helped them to know how best to acquire and pay back their loans in the given time.

It is recommended that the management of FINCA should set workshop, education programs, mass media programs and sensitization programs in order to inform and educate small scale famers on the strategies to effective manage their businesses. FINCA should restructure the loan terms and conditions in order to make them favourable in relation to the capability of its clients to acquire and repay loans. This will motivate clients to apply for loans thus sustaining their financial activities.

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