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SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS
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SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS

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  • 1. SOUND MANAGEMENT AND PERFORMANCE OF MICROFINANCE INSTITUTIONS A CASE STUDY OF PRIDE MICRO FINANCE LTD NASWALI INNOCENT 09/U/2503/AFD/PD RESEARCH REPORT SUBMITTED TO THE SCHOOL OFMANAGEMENT & ENTREPRENEURSHIP IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A BACHELOR OFSCIENCE DEGREE IN ACCOUNTING AND FINANCE OF KYAMBOGO UNIVERSITY i
  • 2. SEPTEMBER 2012DECLARATIONI NASWALI INNOCENT, declare that this research report is my original work and has neverbeen submitted to any university or college for any award.Signed..........................................................NASWALI INNOCENT,Date.................................................. ii
  • 3. APPROVALThis is to approve that this research report about “SOUND MANAGEMENT ANDPERFORMANCE OF MICROFINANCE INSTITUTIONS” has been carried out under mysupervision and is now ready to be submitted in to the Kyambogo University academiccommittee for marking.Signed…………………………………….. dated……………………….MR. WALAKIRA HUSSEINLecturer School of Management & Entrepreneurship iii
  • 4. DEDICATIONI dedicate this report to my dear friendsI will always remember the kindness and support you offered to me. iv
  • 5. ACKNOWLEDGEMENTI owe my deepest and most abiding gratitude to my LORD GOD who has guided me through theentire process while compiling this report.Special thanks v
  • 6. TABLE OF CONTENTSDECLARATION.............................................................................................................................iiAPPROVAL...................................................................................................................................iiiDEDICATION................................................................................................................................ivACKNOWLEDGEMENT...............................................................................................................vTABLE OF CONTENTS................................................................................................................viLIST OF TABLES..........................................................................................................................ixABSTRACT.....................................................................................................................................xLIST OF ACRONYMS AND ABBREVIATIONS.......................................................................xi INTRODUCTION.......................................................................................................................1 1.0 Introduction;.......................................................................................................................1 1.1 Background of the study....................................................................................................1 1.2 Statement of the problem...................................................................................................3 Commercial banks traditionally lend to medium and large enterprises which are judged to be creditworthy, avoid doing business with the poor and their micro enterprises because the associated cost and risks are considered to be relatively high. Microfinance institutions (MFIs) have therefore become the main source of funding micro enterprises in Africa and in other developing regions. Anyanwu (2004)....................................................................3 1.3 The purpose of the study....................................................................................................3 1.4 Objectives of the study.......................................................................................................3 1.5 Research questions.............................................................................................................3 1.5.0 Scope of the study...........................................................................................................4 1.5.1 Content scope;.................................................................................................................4 1.5.2 Functional scope;............................................................................................................4 1.5.3 Geographic scope;...........................................................................................................4 1.5.4 Periodic scope;................................................................................................................4 1.6 Significance of the study..................................................................................................5 1.7 Definition of the terms;..........................................................................................................6CHAPTER TWO.............................................................................................................................7 REVIEW OF RELATED LITERATURE...................................................................................7 2.0Introduction.........................................................................................................................7 2.1 The concept of microfinance institutions;..........................................................................7 2.2.1 Human Resource and Management ...............................................................................9 vi
  • 7. 2.2.2 Regulation and Supervision of Micro Finance Institutions............................................9 2.2.3 The management style of the microfinance institutions.................................................9 2.2.4 Coordination in the Microfinance industry for sound management.............................11 2.3.0 Examining the impact of sound management on performance.....................................11 2.4.0 Establishing the other factors for the performance of the microfinance institutions....13The banking sector in Uganda is not very well developed so the lack of access to bankinginstitutions and this has adversely affected the performance of many institutions. By the merefact that financial institutions mostly in rural areas are not well developed acts as an obstacle asthe microfinance institutions end up only limited to the clients that are located in the urbancenters while ignoring those in the rural areas and leaving them to keep their money under theirpillows and remaining ignorant about the securities and shares availed by the microfinanceinstitutions to increase on their capital base..................................................................................15 2.5 Microfinance products and services that enable microfinance institutions to perform...15 2.6.0 Ways of improving the performance of microfinance institutions...............................17 2.7 Conclusion.......................................................................................................................19CHAPTER THREE:......................................................................................................................20 METHODOLOGY....................................................................................................................20 3.0 Introduction......................................................................................................................20 3.1 Research design...............................................................................................................20 3.2 Population of study..........................................................................................................20 3.3 Sample size and sampling techniques..............................................................................20 3.3.1 Sample size...................................................................................................................20 3.3.2 Sampling Technique.....................................................................................................21 3.3 Instruments of data collection..........................................................................................21 3.3.1 Interview Guide............................................................................................................21 3.3.2 Questionnaires...............................................................................................................21 3.3.3 Observation schedule....................................................................................................22 3.3.4 Documentary study and desk research methods;..........................................................22 3.4 Data Analysis and presentation;.......................................................................................22 3.5 variables of the study;......................................................................................................22 3.6 Validation of tools............................................................................................................22 3.7 Data collection process....................................................................................................23 3.8 Analysis methods.............................................................................................................23 3.9 Limitations.......................................................................................................................23CHAPTER FOUR..........................................................................................................................25 DATA ANALYSIS, PRESENTATION AND INTERPRETATION OF THE FINDINGS.....25 vii
  • 8. 4.0 Introduction;.....................................................................................................................25 4.1.0 Presentation of findings about the background information of the respondents;.........25 4.2 Investigating the management styles used by microfinance institutions.........................28 4.3.0 Examine the impact of sound management on performance of microfinance institutions..............................................................................................................................31 4.4.0 Establishing the other factors for the performance of the microfinance institutions....33 4.5.0 How the performance of the microfinance institutions can be improved through sound management...........................................................................................................................36CHAPTER FIVE...........................................................................................................................39 SUMMARY OF FINDINGS, DISCUSSIONS AND CONCLUSION.....................................39 5.0 Introduction......................................................................................................................39 5.1Summary of the study findings;........................................................................................39 5.2 Discussion of the findings of the study;...........................................................................40 5.3Conclusions from the study;.............................................................................................41 5.4Recommendations from the study....................................................................................41 5.5Suggested areas for further research,................................................................................42References......................................................................................................................................43Appendix 1.....................................................................................................................................45 RESEARCH QUESTIONNAIRE.........................................................................................45 SECTION B...........................................................................................................................46 2.0Investigating the management styles used by microfinance institutions..........................46 4.4 do you think the performance of the Microfinance institutions can be improved?.........49 APPENDIX 2.............................................................................................................................50 TIME SCHDULE..................................................................................................................50 APPENDIX 3.............................................................................................................................52 BUDGET ESTIMATE...........................................................................................................52 Appendix 4.................................................................................................................................53 Research letter........................................................................................................................53 viii
  • 9. LIST OF TABLES4.1.1 Table 1: Showing the gender of the respondents..................................................................254.1.2 Table 2: Findings about the age bracket of the respondents.................................................264.1.3 Table 3: Findings about the distribution of departments of the respondents .......................274.1.4 Table 4: findings about the duration taken by the employees in the company.....................274.2.1 Table 5: Showing the management styles applied in Pride microfinance ltd (MDI)............294.2.2 Table 6: Showing whether the management styles applied are effective in the organization.........................................................................................................................................................294.2.3 Table 7: Showing what the respondents think of the microfinance’s management style.....304.2.4 Table 8: Showing personnel with responsibility of ensuring sound management in thecompany.........................................................................................................................................314.3.1 Table 9: Whether the management style has an impact on the performance of themicrofinance institution.................................................................................................................324.3.2 Table 10: How sound management affects the performance of microfinance institutions...324.3.4 Table 12: Whether the management of the institution has authority to implement vitalchanges...........................................................................................................................................334.4.1 Table 13: Which of the following factors affect the performance of microfinanceinstitutions......................................................................................................................................334.4.2 Table 14: How these factors have affected the performance of microfinance institution....344.4.3 Table 15: Do you think these factors play the pivotal role on performance of microfinanceinstitutions or it’s the management style of the institution that plays the pivotal role?.................354.5.1 Table 16: whether the performance of the microfinance institutions can be improved......364.5.2 Table 17: Showing what should be done about management so as to improve performanceof the microfinance institutions.....................................................................................................374.5.3 Table 18: Findings about what should be done to ensure sound management in themicrofinance institutions................................................................................................................374.2 How do these factors affect the performance of microfinance institutions?...........................484.3 Do you think these factors play the pivotal role on performance of microfinance institutionsor it’s the management style of the institution that plays the pivotal role?...................................494.5 What should be done about management so as to improve performance of the microfinanceinstitutions?....................................................................................................................................494.6 What should be done to ensure sound management in the microfinance institutions?..........49 ix
  • 10. ABSTRACTThis study was about investigating of the impact of sound management on the performance ofthe microfinance institutions with a case study of pride microfinance ltd (MDI) and in doing this;the researcher was guided by the objectives such investigating the management styles used bymicrofinance institutions, examining the impact of sound management on performance andestablishing the other factors for the performance of the microfinance institutions.The study was both descriptive and analytical in nature and it involved the observation of theemployees and also issuing of questionnaires that were answered by the respondents and later onreturned to the researcher for analysis and presentation of the findings which were tabulated andpresented in percentages.The researcher found out that sound management is a product of factors such as the managementstyle of the company and these styles included autocratic style, value leverage, democratic,persuasive and consultative and all these have away they impact on the performance of theinstitutions such as timely preparation of the financial statements, quick and timely decisionmaking. And other factors such as the level of competition in the industry and he regulatoryframework of the institution.In conclusion therefore, the research found out that sound management is the pillar to theperformance of the company and this works in consultation with other factors such as the spreadout of the company, the level of technology and the competition level in the sector yet theregulatory framework of the central bank over the microfinance institutions to cater for theirperformance.The researcher therefore recommended that the microfinance institutions should adhere to theguidelines of the corporate governance provided by the central bank and ensure formulation of ahuman resources committee for the implementation of the management policies, improvement inthe level of technology so as to serve more clients and to increase profitability. x
  • 11. LIST OF ACRONYMS AND ABBREVIATIONSMFI : Microfinance InstitutionsAMFIU : Association of Micro enterprise Finance Institutions of Uganda.BOU : Bank of UgandaCMF : Centre for Micro Enterprise Finance.DFID : Department for International Development.ECS : Entandikwa Credit SchemeGOU : Government of Uganda.IFAD : International Fund for Agriculture DevelopmentMCC : Micro Finance Competence Centre.MDIs : Micro Deposit-taking InstitutionsMFIs : Micro Finance Institutions.MFPED : Ministry of Finance, Planning and Economic DevelopmentMGLSD : Ministry of Gender, Labour and Social DevelopmentNGOs : Non GovernmentOrganisationsPEAP : Poverty Eradication Action PlanPMA : Plan for the Modernisation of AgricultureSME : Small and Medium Sized EnterpriseUCA : Uganda Cooperative Alliance. xi
  • 12. UCAP : Uganda Micro Finance Capacity-Building Framework xii
  • 13. CHAPTER ONE: INTRODUCTION1.0 Introduction;This chapter consists of the background of the study, problem statement, the purpose of thestudy, research objectives and, questions, significance and the definition of the major terms thatwere used in the study1.1 Background of the studyThe term microfinance is often used interchangeably with microcredit and connotes a financialventure with interest in rendering services to the poor although with profit-making in view.According to Elahi and Danopoulos, (2004) microfinance is defined as “the attempt to improveaccess to small deposits and small loans for poor households neglected by the banks.” Thismainly applies to the commercial banks.Uganda’s financial system is characterized by the co-existence of formal and informal financialmarkets. The formal financial markets, which mainly comprise of commercial banks,development banks and credit institutions mainly exist in urban areas and offer a narrow range offinancial services. They concentrate on providing working capital mainly to medium and large-scale enterprises. Furthermore, the formal financial institutions are inflexible in their operations,with respect to the needs of the small-scale enterprises and the poor people in the rural areas whomay not have collateral or well-written feasibility studies to solicit for loans. As such, the ruralareas, where the majority of poor people live, remain either under -banked or served by informalfinancial institutions. It is estimated that only 10% of the rural population and 5% of the ruralpoor have access to financing services in terms of saving and credit. This limits the rate ofinvestment and employment creation particularly in rural areas, thus constraining overalleconomic growth (UBOS and MSEPU, 2003). A wide range of Micro Finance Institutions(MFIs) have, however, existed in Uganda in many forms and for many years to respond to theresource gap in the market and are working to become more responsive to the real needs of theirclients who constitute low income households, thereby contributing to economic growth. 1
  • 14. However, though Uganda has a long history of informal finance, a more organised micro-financeindustry picked momentum in the early 1990s following the liberalisation of the financial sector.The industry is therefore still young, but very vibrant. In the last over ten years, the industry hasgrown as high as 70 percent per annum. Despite this growth, the rural financial sector in Ugandais largely underdeveloped, fragmented and not adequately integrated with the formal financialsector. The costs of operation of MFIs are also generally higher than those of the formal financialinstitutions since MFI clients are generally located a distance from the branches and requirecontinuous monitoring. Interest rates are hence necessarily higher for loans obtained at MFIsthan those on loans obtained from the formal financial institutions (Ledgerwood et al, 2002). Toreverse this trend, the government and key stakeholders have started initiating policies aimed atimplementing market based rural financial services on a sustainable basis with the majorobjective of increasing access to and availability of micro finance services in rural areas wherethe poor people live and work. Therefore, the role played by MFIs is high in the growth strategyof Uganda. In its original form, micro-finance business was considered as ‘charity.’ As a result,the performance of the schemes was adversely affected by very poor loan recovery, inefficiencyand high management costs which consequently led to underperformance or collapse. The viewthat prevailed for many years was that micro borrowers were too poor to pay back their loans atcommercial rates and therefore, any loans to them must be subsidised.However, over the past decade the industry has transformed into a large, dynamic private sectorcatering for the financial needs of the low -income households and economically active poor.Over the years, the MFIs have demonstrated considerable comparative advantage in their serviceprovision to rural and low -income urban clients. Furthermore, most institutions have embraced amore business oriented outlook and maintaining their target groups of economically active poorwhile focusing on achieving operational and financial sustainability.These therefore call for a research to be carried out to cater for the sound management and how itimpacts on the performance of the microfinance institutions in Uganda. 2
  • 15. 1.2 Statement of the problemCommercial banks traditionally lend to medium and large enterprises which are judged to be creditworthy, avoid doing business with the poor and their micro enterprises because the associated cost and risks are considered to be relatively high. Microfinance institutions (MFIs) have therefore become the main source of funding micro enterprises in Africa and in other developing regions. Anyanwu (2004)Five banks including the popular Cooperative Bank unexpectedly closed because of internalfinancial problems, partly due to inadequate prudential supervision, which led to grossviolation of banks regulations. They fell short of capital requirements stemming fromproblems of poor loan documentation, inadequate provisioning, insufficient risk assessmentcapacity, internal fraud and other management weaknesses. Moreover, the partialprivatization of the Uganda Commercial Bank, which resulted in the closing of many ruralbranches, left large areas of the country without any formal financial services and openedthe way for microfinance institutions this fact prompted the researcher to investigate soundmanagement and performance of microfinance institutions.1.3 The purpose of the studyThe purpose of the study was to assess the sound management and performance of microfinanceinstitutions.1.4 Objectives of the study1. To investigate the management styles used by microfinance.2. To examine the impact of sound management on performance.3. To establish the other factors for the performance of the microfinance institutions.1.5 Research questions1. Which management styles are used by microfinance institutions?2. How does sound management impact on performance of microfinance institutions?3. What are the other factors for the performance of the microfinance institutions? 3
  • 16. 1.5.0 Scope of the study.1.5.1 Content scope;Sound management was the independent variable and performance of the microfinanceinstitutions was the dependent variable.1.5.2 Functional scope;This study took look at sound management principles and how these have impacted on theperformance of the microfinance institutions and these included the financial, operational andrisk management of the microfinance institutions.1.5.3 Geographic scope;The findings of the study are limited to pride microfinance limited (MDI) located along plot 8-10Metropole house along Entebbe road in central division Kampala Capital City.1.5.4 Periodic scope;The study was carried out in the period of four months that is between April to August 2012.And the review was from 2007 to 2012. 4
  • 17. 1.6 Significance of the studyThe information that was generated from the research study is useful in the following ways;The proposed research helped the researcher in understanding the sound management principlesand how these have been use in the organisations to ensure effective performance and how theabsence of sound management affects the performance of the microfinance institutions.The study is of vital use to the microfinance institutions as it helps them to understand the impactof sound management on their performance and also goes further in to establish the other factorsthat affect the performance of the microfinance institutions.The study helped to give the researcher the needed confidence as it will enable me to apply theclass theory work in the actual field for example the knowledge of collecting the informationusing the different methods such as interview and observation.The study also enabled me boost my confidence as it will enable me to interact with severalpeople in the profession. That’s to say interact with the practicing members which enabled megain the insight of the actual field.The study is of vital use to the regulatory bodies such as AMFIU to get to understand the reasonsfor the performance of the microfinance institutions and the impact of the management of theseinstitutions on their performance.The study was also of vital use to me as it enabled me be eligible to qualify for the award of abachelor’s degree of Kyambogo University as this is a necessity.All the other institutions that want to assess the impact of sound management on the performanceof the microfinance institutionscan use this research study as a benchmark for their findings andthus compare the results that will be contained in this research and their findings so as to checkout for the discrepancies. 5
  • 18. 1.7 Definition of the terms;Microfinance;According to Elahi and Danopoulos, (2004) microfinance is defined as “the attempt to improveaccess to small deposits and small loans for poor households neglected by the banks.” mainly thecommercial banks.Sound management;Refers to effective methodologies and the adequate management and coordination capacitynecessary for the success of institutions and these include having the right policies in place toforesee the implementation and achievement of the organisation’s objectives.Performance;Performance refers to the ability of an enterprise to attain its predetermined objectives and be inplace to access the financial resources.Internal controls;According to Whittington and Pany internal controls refer to systems set in place to ensure thatthe organization attains its predetermined objectives such as budget achievements, ensuring legalconformance and timely preparation of financial statements.Microfinance products;These refer to the financial services or products that are provided by the microfinance institutionsto cater for the different needs of their clients and these may include money transfer, loanextension, health care schemes and price protection for coffee farmers and salary based loans.Interest;Interest is a fee paid by the borrower to the lender on borrowed cash as a compensation forforgoing the opportunity of earning income from other investments that could have been madewith the loaned cash. Richardson et’al (2010) 6
  • 19. CHAPTER TWO REVIEW OF RELATED LITERATURE2.0 IntroductionThis chapter provides the in-depth information or existing information the problem, shows howthe study fits into what the other academicians and researchers have done. The literaturereviewed is on the sound management and the performance of microfinance institutions withguidance from the research objectives.2.1 The concept of microfinance institutions;According to the Poverty Eradication Action Plan (2000) the development of micro financeservices became an important policy intervention recommended in all plans of the government ina way of alienating poverty and in this context that over the last few years, the GOU incollaboration with donors and other stakeholders initiated have initiated a number of programsaimed at developing the micro finance industry.This recognition is evidenced by rapid advances by the government, donors and practitioners inthe development and implementation of programs that support micro finance initiatives inUganda, as well as the dramatic expansion of the micro finance industry. The micro financeindustry had for a long time operated under a number of constraints, among others: lack of legalrecognition, weak institutional capacity and unsustainable sources of funding. As explained inthe Annual Supervision Report Issue, (No. 2, December 2011). 7
  • 20. Ledger (2002) highlighted the structure of the micro finance industry in Uganda is shown below.Category Number CharacteristicsA 5-8 At or nearing operational or financial self-sustainability. Well documented operational procedures. Fairly good MIS, well qualified management and staff. Applying Micro Finance best practices. Often registered as companies limited by guarantee. Active clients over 10,000.B 10-15 Mainly NGOs. Also registered as companies limited by guarantee. Charge market interest rates, have adapted a business-oriented approach to poverty alleviation, and are moving towards Operational Self-Sufficiency (OSS). Fair documentation of procedures and MIS. Good management, OSS at levels between 50% and 85%. Active clients range from 5,000 to 10,000.C 45+ Mainly small local NGOs with limited resources and clientele. Fairly familiar with “Best Practices” and are within the industry’s information loop. However, most have modestly qualified management and are still far from reaching OSS (35% to 49%). Active clients ranging from 500 to 3,000.D Numerous Small community based organisations, generally not well known in the sector. Largely outside the national micro finance information loop. Most are generally little aware of micro finance best practices. Focused on rural outreach but have minimal numbers of clients.Source: Ledgerwood et al (2002).2.2 Investigating the management styles used by microfinance as a factor for sound management.Many organizations struggle to meet the challenges of optimizing performance and how shouldthey measure performance what they should measure and how leaders can ensure that 8
  • 21. communication channels throughout the organization are open. Too often, organizations will putin place measurement systems and structures that deliver the opposite of what they expected yetwith sound management in place, the systems work for the best and in order to ensure this, thebank of Uganda Annual Supervision Report Issue, (No. 2, December 2011) reported that;2.2.1 Human Resource and ManagementSurvey findings indicate that the management teams of most MFIs in both urban and rural areashave all obtained university and tertiary levels of education, respectively. However, the majorityof the member based MFIs lacked business management skills. Further, the experience ofmanagement teams reduces proportionately to loan portfolio, while most MFIs engage morefemales than males in their routine activities. One strong implication is that these institutions arenot only providing financial services to those without access to them in the formal financialsector, but they also provide employment this was indeed also sighted in Kamwana’s report(2011).2.2.2 Regulation and Supervision of Micro Finance InstitutionsIn order for MFIs to effectively fulfill their role of intermediation and to grow in a sustainablemanner, these institutions must operate in a financially sound and safe manner. Prudentialregulation and bank supervision of the MFIs, hence, became necessary. In this regard, the MicroFinance Deposit-Taking Institutions (MDI) Act (2003) was enactedThe Act stipulates that all micro finance providers, including non-deposit taking institutions andvery small member-based organizations mobilizing deposits from their members, to becategorized under Tier 4. Which institutions will neither be regulated nor supervised by BOUunder the proposed law. Consequently, they will not be allowed to take deposits from the public.These MFIs will be overseen by an umbrella body, the Association of the Micro FinanceInstitutions of Uganda (AMFIU). An important role played by the AMFIU in supporting growthof the MFI industry was to develop uniform performance indicators and reporting format thatconstitutes a performance monitoring system for the non-regulated MFIs.2.2.3 The management style of the microfinance institutions.Ledgerwood et’al (2002) advanced that several management styles are used in the managementof microfinance institutions which help ensure sound and effective management for the improved 9
  • 22. performance of these institutions and these styles are not used individually but rather inassociation with other management styles.Managers have to perform many roles in an organization and how they handle various situationswill depend on their style of management. A management style is an overall method ofleadership used by a manager. There are two sharply contrasting styles that will be broken downinto smaller subsets later and these were autocratic and permissive as explained in Kamwana’sreport (2011).He further pointed out that each management style has its own characteristics in that autocraticleaders makes all decisions unilaterally while permissive leaders permit subordinates to take partin decision making and also gives them a considerable degree of autonomy in completing routinework activities. Combining these categories with democratic (subordinates are allowed toparticipate in decision making) and directive (subordinates are told exactly how to do their jobs)styles give us four distinct ways to manage:The directive democrat involves the organizations using this style of management to have themanagers encouraging participative decision making and close supervision of the subordinates.The other style is having the directive autocrat and this way, the manager makes decisionsunilaterally and closely supervises subordinates as they perform their activities to iron outirregularities.The permissive democrat like the directive democrat allows participative decision making in theorganization however the difference is that he/ she gives subordinates latitude in carrying outtheir work.Yet the permissive autocrat like the directive autocrat also makes decisions unilaterally howeverthis one gives the subordinates latitude in carrying out their work. Ledgerwood (2002) however,recommended that managers must also adjust their styles according to the situation that they arepresented with so as to ensure a sound management style and thus listed the four quadrants ofsituational leadership that depend on the amount of support and guidance needed: 10
  • 23. Kamwana (2011) emphasizes that telling works best when employees are neither willing nor ableto do the job thus creating a high need of support and high need of guidance by the seniormanagers of the organization.And that delegating works best when the employees are willing to do the job and know how togo about it but have a low need of support and low need of guidance from the seniormanagement which may be caused by fear of what the manager would think of them.Richardson et’al (2008) proposed that the Participating manager works best when employeeshave the ability to do the job, but need a high amount of support that is to say that since theemployees are knowledgeable about the job, the have a low need of guidance but high need ofsupport).Yet the selling manager is referred to as one who works best when employees are willing to dothe job, but don’t know how to do it that is to say the employees have the desire to carry out thejob but need to be guided in order to carry out the particular job. The different styles depend onthe situation and the relationship behavior amount of support required and task behavior and theamount of guidance required.2.2.4 Coordination in the Microfinance industry for sound management.Coordination in the Ugandan micro finance industry has been enhanced under the guidance ofthe Micro Finance Forum, which is comprised of government agencies, donor agencies and otherpractitioners who support development of the industry. The Micro finance Forum meetsregularly under the chairmanship of the Ministry of Finance, Planning and EconomicDevelopment, to discuss new developments and constraints in the micro finance industry.Uganda also exhibits a high level of donor coordination and was, hence, selected as one of twocountries to be studied at field level as part of the Consultative Group for assistance to the PoorCGAP-led Donor Peer Review process to pilot ways of improving aid effectiveness in the microfinance industry.2.3.0 Examining the impact of sound management on performance.The performance monitoring system, has established consistent standards, which will contributeto risk control, adherence to minimum requirements and best practices within the micro financeindustry so as to assess the impact of sound management on the performance of the microfinanceinstitutions. Various scholars have forwarded what they think could be the impact of sound 11
  • 24. management on the performance of institutions.Over the past decade, the Government of Uganda via the Ministry of Gender, Labour and SocialDevelopment (MGLSD) has implemented and/or supported various micro credit schemes aimedat fighting poverty in the country. Most of these schemes focused on the provision of revolvingfunds for micro credit to households at the grass root level and the poor management of theseschemes has made majority of them to hit a snag and fail to accomplish the desired goals of thescheme (Kamwana 2011).In view of this, there was need to restructure the surviving schemes with the aim of institutingmeasures to recover outstanding loans, and divesting or writing off non-performing loans,government withdrawal from the provision of credit and transferring the recovered resources tocredible MFIs capable of delivering sustainable services under a new Implementation Plan toexpand the outreach of sustainable micro finance meaning with good management in place thenthe objectives of the schemes such as recovering outstanding loans could be attained.The performance monitoring system has been developed in consultation with all stakeholdersand is expected to contribute to growth of the industry in a number of ways as it enhancesplanning of MFIs through clearer targets and benchmarks for their expected development, andalso improves financial management for the better performance of the microfinance institutionsthus leading to increased profitability of the microfinance institutions as noted in the MicroFinance Capacity Building Framework (UCAP). (2011)Sound management increases the awareness and ability of MFIs to report on their performance,for internal management purposes as well as external reporting purposes, and through uniformreporting, the MFIs save time that they spend in applying for funds and reporting to differentfunding agencies, and time that funding agencies take in assessing applications and reports fromMFIs . This therefore implies that sound management facilitates timely preparation of financialstatement as forwarded in the Micro Finance Capacity Building Framework (UCAP) (2011).Kamwana (2011) notes that the transparency and accountability of the microfinance institutionsis increased in the micro industry as it safeguards against mismanagement of funds and fraud and 12
  • 25. also contributes to protecting clients, thus increasing public confidence in the industry forimproved performance.Sound management also ensures reliable and up-to-date information on the performance of theindustry which is useful to different stakeholders including policy makers and funding agencies.And also enhances Coordination within the sector and lobbying and enables advocacy onimportant issues affecting the sector to be facilitated Kamwana (2011)The Apex Sub Committee of the Uganda Micro finance Forum (2011) proposed that there isneed to ensure good corporate governance within these institutions in order to build publicconfidence in these institutions and ensure that they grow in a sustainable way.2.4.0 Establishing the other factors for the performance of the microfinance institutions.There are other factors apart from the management style of the microfinance institution thataffect its performance and these factors range from the technological to the political factorsprevailing in the country as reported by Kamanya (2011)The level of political stability in the country affects performance in a way that riots anddemonstrations bring activities in the economy to a standstill depriving the institutions from thewould be depositors, and the borrowers thus lowering their performance levels.Among other factors that lead to poor performance of Organizations in not only Uganda but inthe entire world is the difficulty in acquiring financing or credit to cover both short and long termoperational needs. This has led to short term and long-term liquidity problems which haveresulted in not only poor performance financially but in many cases total business failure. Newdata on 129 Countries investigates cross-country determinants of private credit, using currentinformation on legal creditor rights and private and public credit registries in 129 countries.Djankov, McLeish and Shleifer (2007).The government is another source of capital, particularly loan capital for MFIs in the form ofrevolving funds and rural farmers support schemes. Funds from government and donors areobtained at concessional terms. However, the underlying danger with donor funds is that these 13
  • 26. funds may dry up in future and the MFIs may find it difficult to mobilize funds from othersources. Therefore, most MFIs are considering possible strategies to ensure their sustainability.An analysis of legal reforms also shows that improvements in creditor rights and in informationsharing precede faster credit growth. We also find that creditor rights are extremely stable overtime, contrary to the convergence hypothesis. Finally, we find that legal origins are an importantdeterminant of both creditor rights and information sharing institutions. The findings indicatethat Uganda many of the 129 countries in the survey is still structural immature to support themodern flexible financing options available in the highly developed world. Djankov, McLeishand Shleifer (2007).One challenge for organizations in Uganda which is the same for the entire business world iseconomic instability resulting from the recent global economic meltdown. According to theinformation sharing site Wikipedia, the 2007–2012 global financial crisis, also known as theGlobal Financial Crisis and 2008 financial crisis, is considered by many economists to be theworst financial crisis since the Great Depression of the 1930s. An article on October 19, 2011 byTeresa Trasino in the IMFSurvey Magazine, urges that one of Africa’s and specifically the Sub-Saharan region’s main challenges is the steady increase in consumer price inflation to an averageof 10 percent in June 2011 against 7½ percent in June 2010 which led to increase in the lendinginterest rates and reduction in customer base for the Microfinance institutions.Although inflation has been driven in part by higher food prices, accelerating nonfood inflationindicates that second-round effects such as claims for higher pay are also taking hold. In manycountries, exchange rates are also coming under significant pressure leading to low returns onexport trade. For business organizations inflation distorts consumer behavior, redistributesincome in a negative way as both fixed income earners and those lacking bargaining power willbecome relatively worse off as their purchasing power falls and predicting the future toaccurately calculate prices and returns from investments become impossible. This has greatlyundermined the power of the clients to make deposits with the microfinance institutions and alsoscared away borrowers which have hampered the performance of the MFIs.According to a survey done by the World Bank called (Doing Business 2011) in which they try 14
  • 27. to measure business regulation in a country using the ease of doing business index. This indexshows that the taxes imposed on the microfinance institutions lower their profitability andgreatly hamper their efforts to invest in diversifying in regions so that they open up brancheselsewhere and increase on their customer base.The banking sector in Uganda is not very well developed so the lack of access to banking institutions and this has adversely affected the performance of many institutions. By the mere fact that financial institutions mostly in rural areas are not well developed acts as an obstacle as the microfinance institutions end up only limited to the clients that are located in the urban centers while ignoring those in the rural areas and leaving them to keep their money under their pillows and remaining ignorant about the securities and shares availed by the microfinance institutions to increase on their capital base.2.5 Microfinance products and services that enable microfinance institutions to performAccording to Ledgerwood etal, (2002), microfinance institutions do not have appropriateliquidity management techniques in place and thus their loan terms range from one month totwelve months. There is little similarity in the loan sizes and terms offered by the different MFIs.However, the majority of loans are of three months duration. Most MFIs report a fairly highrecovery rate of about 85 percent on their loan portfolio and the institutions have managed tocome up with the following products so as to improve their market share;Safety and Money Transfer;Some microfinance institutions provide services to their clients such as safe custody of valuableitems for example land titles and wills etc. They also assist their clients to transfer their moneysafely from one point to another especially in rural areas.Salary Based Loan ProductsWhere the employer is required to deduct the repayments from the monthly salary cheques of hisemployees and transfer them to the participating microfinance institutions and because of theseaccording to report by the Rural credit finance (2010), the salary based loans are provided withthe clients’ salary being the security and deducted at the end of every year. 15
  • 28. Health Care Schemes;Micro Care Limited has introduced a health financing scheme for clients of MFIs and theirimmediate family to access better health care at affordable prices through agreements withhospitals and microfinance institutions and under this scheme, the clients form groups and payup a minimal up-front quarterly premium to Micro Care Limited as per its report in (2011).Price Protection for Coffee Farmers;A pilot price protection scheme has been set up by Uganda Cooperative Alliance (UCA) andUnion Expert Services (UNEX) Limited to enable farmers to purchase a price insurance that willenable them to reap a guaranteed price for their coffee products. The total product of farmers willthen be insured at a minimum fixed price through an international broker trading at the Londonmarket as per the report by Karuhanga (2010).Microfinance institutions also deal in the provision of foreign exchange services to the clientsdealing in exchanging of financial currencies such as American dollars, British pounds, the randsand other currencies so as to make life easier for their clients and increase their profitability.Yet majority of the microfinance institutions who mainly employed the group lendingmethodology approach especially for small loans usually repayable over 4 - 6 months, a goodnumber of them have now introduced individual loan products to cater for clients who needlarger loans for growing businesses and these take form of;Some MFIs testing products specifically suited to agricultural borrowers, particularly thesmallholder farmers where repayment schedules are designed to complement the seasonal cashflow of the farmers.And last but not least, the microfinance institutions in Uganda also take part in exhibition andmarketing their products and services to potential customers and business partners as per theguidance given by Ocici (2012). 16
  • 29. 2.6.0 Ways of improving the performance of microfinance institutionsThe microfinance institutions can however better their performance by adopting the followingpolicies presented by Walday Amha (2008)Given the tough environment where MFIs are working, the performance of microfinanceinstitutions in Uganda has been quiet impressive. Thus if they are to increase their pace inoutreach and quality of services provided to their clients in the future, and improve on theirfinancial and operational performance, they need to address the following issues.Microfinance and other micro lending institutions in Uganda should focus on the innovative andresponsiveness of their financial products to the needs of their clients, i.e., they should learn fromwhat their clients want and then produce products by incorporating the information from marketresearch or needs survey, on one hand, and develop built-in tools to measure the impact of theirprogram on the needs of their clients on the other Walday (2008)Microfinance institutions such as Pride microfinance and Finca Uganda should increase outreachby providing cost effective and/or affordable financial services to the poor. Although there aresuccess stories in delivering financial services to poor women through microfinance institutions,particularly in Asia, there is still a dire need of using microfinance as a tool of empoweringwomen in the Ethiopian context. The revolution in microfinance should focus on reaching thevery poor and the marginalized groups that reside in remote and pastoralist areas such as Kigeziand even the untapped Karamoja region. However, the scaling up should be done withoutdistorting the markets explained Kamwana (2011)There should be an improvement in access to loan capital and developing efficient and effectivesystems for mobilizing savings are critical for increasing outreach and capitalization of MFIs.Funds such as equity, quasi-equity, social and private investors (both domestic andinternational), corporations, foundations, banks, selling bonds, and securitization should beexhausted to meet the large funding gap so as to encourage expansion as noted by Walday (2008)Walday (2008) further argued that the growth and performance of microfinance institutionsmainly depends on their capacity. Thus requires improvement in governance, human resourcedevelopment, systems development in internal control, business plan, marketing strategy and 17
  • 30. technology development both MIS and front end technologies, mobilization of funds throughmobilizing saving, linking with banks, attracting private investors by selling shares, attractingsocial investors.For a long time, the microfinance markets have been underdeveloped and may remain so ifinvestments in communication and economic infrastructure as well as adequate incentives are notincluded in development policies at national level.There should be a clear role of the global players in promoting microfinance in Ethiopia. Thisincludes: facilitate funding of microfinance institutions by leveraging private capital, providingtechnical assistance, training, and building capacity and knowledge sharing.One of the major factors that affect the performance of microfinance institutions in Ethiopia isthe high risk associated with unfavorable weather on production (drought, floods), disease orpest damage, economic risks due to uncertain markets and prices, productivity and managementrisks related to the adaptation of new technologies, the microfinance institutions thus need toseriously consider innovative and cost effective risk protection methods and products forexample on Agricultural loans. Creating an enabling policy and regulatory environment has a significant impact on growth,productivity and efficiency of microfinance institutions in Uganda thus the Ugandan governmentand the financial players such as the association of Microfinance Institutions in Uganda shouldcreate policies that can uplift the sector to better and higher prospects as there is still a chance formore un banked clients and regions to tap on.It is also recognized that there are some areas in the country, which are under-served by MFIs. Inparticular, in the northern part of the country delivery of micro finance services is difficult due toinsecurity which has led to a large number of people living in displaced peoples’ camps,disruption of economic activity, and destruction or deterioration of infrastructure such as roads,trading centers and marketing societies. Though current efforts to improve the securitysituation10 in these areas will diminish some of this risk, further motivation is needed to allowMFIs to venture into such areas without taking on the full risk. Under the UCAP it has beenproposed that the GOU provides for a "Remote Rural Outreach Fund" to be established to avail 18
  • 31. operational grants to good practice MFIs willing to expand their services to areas of the countrythat do not currently offer conducive markets for micro finance.In addition, a mechanism is being developed by stakeholders in the micro finance industry forproviding grant support to enable MFIs access to affordable capacity building. While this willfacilitate MFIs access to affordable capacity building, the databases managed under the UCAPframework will be enlarged to include suppliers of capacity building services and appropriatetraining materials for rural clients, in preparation for response to demands identified by theFEWs from the under-served sub-counties.The MDI Act (2003) which is embedded within an overall regulatory and supervisory 4-tierframework clearly establishes the responsibility of Bank of Uganda (BOU) to license, regulate,supervise and discipline all deposit taking MFIs, under Tier 3. 5 A number of regulatory andprudential guidelines have been set under the MDI Act (2003) to ensure that MDIs operate in asound and manner and do not expose them to excessive risk taking. These include the following:6 (1) Establishment of minimum capital and liquidity sufficient for deposit taking andintermediation2.7 ConclusionIn conclusion therefore, the management of an organization is the pillar for the organisation’seffective performance however, for there to be sound management, it may depend on severalfactors such as the style of management in the company, the human resource the level ofautonomy accorded to the employees and the value leverage in the organization. This affectsperformance in encouraging timely preparation of financial statements, ensuring compliancewith the law and motivating employees to increase on their productivity. However other factorssuch as the availability of capital, the regulation of the sector, the current economic conditionsand the products and services provided by the microfinance institutions affect the performance.However as noted the government should enact a better regulatory policy to cater for the MFIsand also encourage competition and infrastructural development. 19
  • 32. CHAPTER THREE: METHODOLOGY3.0 IntroductionThis chapter presented the research design, the study population and the methods of sampling theresearcher used. The tools for collecting data and how they were validated, the process ofcollecting data and anticipated limitations were also explained out here.3.1 Research designThe conceptual framework of this study was to discover and describe the participant’sobservations and experiences about sound management and performance of the Microfinanceinstitutions. The researcher sought to explore the concept of microfinance, the principles ofsound management, the impact of sound management on performance of the microfinanceinstitutions and the other factors that affect the performance of the microfinance institutions. Astructured approach was appropriate for answering the questions and meeting the objectives ofthe study therefore qualitative and quantitative methods of data collection were used. This soughtto establish the impact of sound management on the performance of microfinance institutions.3.2 Population of study.The population of this study included the following personnel, the human resources departmentsin Organizations as they are responsible for the implementation of sound management in theinstitutions, the managers of the institutions, the supervisors and the entire staff plus the clientsof the enterprises. These included both ladies and gentlemen.3.3 Sample size and sampling techniques.3.3.1 Sample size.The study took into consideration the availability of correspondents for the given samplepopulation for example the 2 top executive were asked for information. And to avoid bias in thesurvey the researcher ensured that out of every three respondents, atleast one of the respondents 20
  • 33. was female. The researcher also made sure that the staffs were not left out as they were vital inthe study and had the basic information that was needed for the study to be carried out.The researcher ensured that at least 20 out of the 40 respondents selected were among the lowline staff of the organization. This made the total sample population of 40 respondents.3.3.2 Sampling TechniqueThe sampling techniques used were the random sampling technique as it gives every item in thepopulation a chance of being selected and thus give the appropriate information needed. Theother was the purposeful method where the key informants like the human resource personneland the administrative manager who were responsible for the implementation of soundmanagement in organisations were asked for their opinion about the sound management and theperformance of the microfinance institutions.A larger sample was selected so as to minimize the sampling error.3.3 Instruments of data collection.This presents the instruments of data collection used while carrying out the study and since noinstrument if used exclusively would collect the sufficient data needed thus there was need toblend these instruments and this included.3.3.1 Interview Guide.Under this technique, the researcher had the respondents asked questions and get the answersdirectly from them. This was a question answer format whereby the researcher just had to notedown the information that the researcher received from the respondents. This informationacquired here was wider and made it easier to get more details whenever clarification on theinformation was needed as the information was collected in the presence of the respondents.3.3.2 Questionnaires.The researcher closed questionnaires to the respondents. The questionnaires were distributed tothe respondents and they allowed ample time to return the questionnaires with the answers onthem. This method was more used as it allowed the respondents who were not free to speak inthe presence of other people to freely give in their views about the problem and yet also allowedmore information to be collected as it was able to address different respondents at the same time. 21
  • 34. 3.3.3 Observation schedule.The researcher travelled to the pride microfinance offices along Entebbe road and observed themanagement of the institution perform their duties in order to get more information about thepresence or absence of sound management in the organization. On doing this, the researcher wasable to establish the relationship that exists between the management and the performance of theentity.3.3.4 Documentary study and desk research methods;This method involved the collection of data from the published and printed company materialand also information from the archives of the company records internet and the journal so as toget the relevant information needed for the study which was about the sound management andperformance of the microfinance institutions.3.4 Data Analysis and presentation;Data was analyzed both qualitatively and quantitatively by use of percentages using the excelspreadsheets for example depending on the number of questionnaires distributed and thosereturned and the variables adopted from the survey instruments pertaining the performance of themicrofinance institutions was cross tabulated against the independent variable which was soundmanagement.The results were summed up in form of qualitative and quantitative measures so as to becomputed and results generated for the interpretations that were made and conclusions andrecommendations drawn out of the study.3.5 variables of the study;The data had two variables that is the dependent and the independent variables.The dependent variable was performance of the microfinance institutions and sound managementwas the independent variable.3.6 Validation of toolsValidation was achieved by making sure that the questions relate to the objectives of the study.Each research question listed examined and information required to answer it was listed andquestions formulated. 22
  • 35. Piloting of the questionnaire was done to see if it obtained the required results. Five people wereasked to read through and see if there were any ambiguities which would be noticed, and also tocomment on the length, structure and wording of the questions. Alterations were madeaccordingly.3.7 Data collection processBecause it was a quantitative research, the researcher relied on quite extensively pre-designedquestionnaire. Information was collected primarily through administering the questionnaire tokey informants between representatives. Where ever possible personal interviewing was used sothat the interviewer had to guide the interviews, explore issues and probe as the situationrequired.The researcher explored the general topics relating to performance of the microfinanceinstitutions to uncover the observations and views of respondents.The participants’ observations were supplemented with gathering and analyzing documents suchas published reports, letters, announcements, and samples of free writing about the topic,journals, policy statements, newspaper articles, magazines, textbooks, press releases, internetarticles and other print material when available.3.8 Analysis methodsData was edited to detect errors and omissions and classified into simple classes on the basis ofcommon characteristics. The researcher then summarized and tabulated the information tofacilitate comparison was done using systems such as the excel spreadsheets for frequencies onthe charts.3.9 LimitationsThe following limitationsencountered during the research process;1. There was a problem of unreliable information due to misinterpretation of the research questions and purpose of the study by some respondents. The researcher overcame this problem by ensuring that respondents understood their purpose of giving correct information through informal explanations. 23
  • 36. 2. There was insufficient funding by respective authorities. This limited the researcher’s movements and area of coverage resolved through the efficient use of the available resources by the researcher and also requests for more funding from friends where necessary.3. The research process was slow and a bit difficult due to lack of skills and experience in research as this was the researcher’s first time to get exposed to it this was managed through constant consultation with the research supervisor and other experienced people in the field of study. 24
  • 37. CHAPTER FOUR DATA ANALYSIS, PRESENTATION AND INTERPRETATION OF THE FINDINGS4.0 Introduction;This chapter is to look at the analysis of the data obtained from the field and presenting the datain the relevant figures and tables and the interpretation of the findings from the field to access thebasic understanding of the problem statement and develop the possible solutions to the problem.4.1.0 Presentation of findings about the background information of the respondents;In the bid to get to know the number of respondents that completed and returned thequestionnaires, the researcher went ahead to examine the details of all those that responded andthe findings have been tabulated as below. The researcher established that the gender, duration ofservice in the organization and the age bracket of the respondents had an impact on the responseas these characteristic could have affected their participation in the survey.4.1.1 Table 1: Showing the gender of the respondentsGender Frequency PercentageMales 18 45%Females 22 55%Total 40 100%Source: Primary data 25
  • 38. Findings from the table1 and figure 1 show that 45% of the respondents were male yet 55% ofthe respondents were female. This means that the majority of the respondents that answered andreturned the questionnaire were females and yet they were also easily accessible. The numberscould also be attributed to the fact that majority of them were tellers which were mainly female.These findings have also been represented on the pie chart as below.4.1.2 Table 2: Findings about the age bracket of the respondentsAge bracket Frequency PercentageBelow 20 years 4 10%20 to 35 years 26 65%Above 35 years 10 25%Total 40 100%Source: Primary dataFrom the findings from table 2 show that 10% of the respondents were below the age of ten yetthe other 65% were between the age of 25 and 35 years of age. Yet 25% of the respondents wereabove the age of 10. The findings of this study were attributed to the fact that the company doesnot employ individuals below the age of 18 which explains the few numbers for those below theage of 20 and majority of the Guards are between the age of 20 and 35 thus the large percentageof respondents from this group. The respondents who were above the age of 35 represented 25% 26
  • 39. of the respondents. This is to the effect that the organization attracts and maintains employees inthe organization and by the age of 30 many of them would have gained vital positions in theorganization thus form majority of the respondents.4.1.3 Table 3: Findings about the distribution of departments of the respondentsDepartment in the organization Frequency PercentageAccounting department 10 25%Human resource department 6 15%Top management 4 10%General staff 20 50%Total 40 100%Source: Primary dataThe findings from table 3 show that 25% of the respondents were from the accountingdepartment while 50% of the respondents were from the general section of the institution yet thedepartment of human resource was represented by 15% of the respondents. The top managementwas also represented by 10% of the correspondents and this is attributed to the fact that theaccounting department comprises of the tellers that were easily reached while the general staffincluded most members of the organization thus formed the highest percentage the topmanagement were few due to the fact that most of them were busy and not easily reached forcomment.4.1.4 Table 4: findings about the duration taken by the employees in the company.Duration in the organization Frequency Percentage0-5 years 24 60%5-10 years 14 35%Above 10 years 2 5% 27
  • 40. Total 40 100%Source: Primary dataThe findings from table 4 show that majority of the respondents have worked with theorganization for the period of less than five years represented by 60% of the respondents while35% of the respondents argued to have worked in the organization for between 5 to 10 years yetonly 5% of the respondents confirmed to have worked there for more than 10 years. This isattributed to the fact that the organization evolved around 2003 and the founding members formpart of the 5% of the respondents as majority ought to have joined other businesses.4.2 Investigating the management styles used by microfinance institutions.For an organization to have sound management, the management styles of the entity should be inline with the principles of the sound management styles. The researcher thus in a bid to find outthe management styles applied in Pride microfinance ltd (MDI), the following results wereestablished from the study. 28
  • 41. 4.2.1 Table 5: Showing the management styles applied in Pride microfinance ltd (MDI)Management style Frequency PercentageAutocratic 4 10%Value leverage 18 45%Management by wandering around 6 15%Laissez faire 4 10%Democratic 3 8%Persuasive and consultative 5 12%Total 40 100%Source: Primary dataAccording the findings of the study presented in table 5, 10% of the respondents said that themanagement of the microfinance institution uses the autocratic style of management yet 45% ofthe respondents said that the management style applied in the company is the value leveragewhere by the system ensures that everyone, at every level, is focused on improving the outcomesthat they are creating. 15% of the respondents said that the management manages by wanderingaround, 10% said the organization uses the laissez faire system yet 8% of the respondents wereof a view that the institution uses the democratic approach of management however 12% of therespondents said the company uses both persuasive and consultative style of management.4.2.2 Table 6: Showing whether the management styles applied are effective in the organization.Effectiveness of the management style Frequency Percentage 29
  • 42. Agree 30 75%Disagree 6 15%Not sure 4 10%Total 40 100%Source: Primary dataThe findings from table 6 show that 75% of the respondents agreed to the fact that themanagement styles are effective in ensuring better performance of the organization and 15% ofthem disagreed to this fact yet 10% of the respondents were not sure of the response to theeffectiveness of the management systems being applied in the company.4.2.3 Table 7: Showing what the respondents think of the microfinance’s management style.Views of the respondents Frequency PercentageThe management is very autocratic 4 10%The management of the MFI encourage innovations 18 45%The management manages mainly by wandering around. 10 25%The management respects every employee in the 8 20%organizationTotal 40 100%Source: Primary dataAccording to the findings of the study, 10% of the respondents were of a view that themanagement of the institution was autocratic yet 45% of the respondents said that themanagement of the institution encourages innovation in the entity and 25% of them saidmanagement manages the organization mainly by wandering around yet 20% 0f the respondentswere of the view that management respects every employee in the organization which implies 30
  • 43. conformity to the guidelines for effective corporate governance.4.2.4 Table 8: Showing personnel with responsibility of ensuring sound management in the company.Responsible personnel Frequency PercentageThe human resource committee 4 10%The human resource manager 8 20%The managing director 10 25%Everyone plays his/ her part to ensure sound 18 45%management in the institution.Total 40 100%Source: Primary dataThe findings from the study presented in table 8 shows that 10% of the respondents were of theview that the human resource committee has the responsibility of ensuring sound management inthe institution, 20% of the respondents forwarded the human resource manager is the oneresponsible yet 25% of the respondents said that the managing director had the responsibility ofensuring sound management in the organization however, 45% of the respondents argued thateveryone in the organization plays his/ her role to ensure sound management in the company.4.3.0 Examine the impact of sound management on performance of microfinance institutions.On trying to find out whether there was a relationship between sound management and theperformance of the microfinance institutions, the researcher in this section examined the impactthat sound management has of performance of the microfinance institutions and the findingshave been tabulated below. 31
  • 44. 4.3.1 Table 9: Whether the management style has an impact on the performance of the microfinance institution.Response Frequency PercentageYes 26 65%No 10 25%Not sure 4 10%Total 40 100%Source: Primary dataAccording to the findings from table 9, 65% of the respondents said that the management stylehas an impact on the performance of the microfinance institutions yet 25% of the respondentssaid no to the fact that the management style has an impact on the performance of the institutionyet 10% of the respondents were not sure of whether the management style has an impact on theperformance of the organization.4.3.2 Table 10: How sound management affects the performance of microfinance institutionsEffect on performance Frequency PercentageEnables quick and timely preparation of financial 18 45%statementsQuick and timely decision making is encouraged 10 25%Leads to reduced levels of rivalry in the firm 6 15%Provides a clear structure of promotion in the firm. 6 15% 32
  • 45. Total 40 100%Source: Primary dataThe findings from table 10, 45% of the respondents said that sound management enables quickand timely preparation of the financial statements. 25% said that sound management facilitatesquick and timely decision making yet 15% of the respondents said that sound management leadsto reduced levels of rivalry in the firm yet 15% of the respondents forwarded the fact that soundmanagement provides a clear structure of promotion in the firm.4.3.4 Table 12: Whether the management of the institution has authority to implement vital changes.Response Frequency PercentageYes 32 80%No 6 15%Not sure 2 5%Total 40 100%Source: Primary dataThe findings from table 12 of the study show that 80% of the respondents agreed to the fact thatthe management of the company has the authority to implement vital changes in the company yet15% of the respondents said no to this fact however, 5% of the respondents were not sure of theresponse to the question.4.4.0 Establishing the other factors for the performance of the microfinance institutions.This section tries to explore the other factors that affect the performance of the microfinanceinstitutions other than the sound management of the institutions. These factors have beenanalyzed and tabulated below.4.4.1 Table 13: Which of the following factors affect the performance of microfinance institutionsFactors affecting performance Frequency PercentageLevel of motivation of the employees 8 20%The regulatory framework of the sector 6 15% 33
  • 46. The level of competition in the sector 6 15%The products offered by the microfinance 20 50%institution to its clients.Total 40 100%Source: Primary dataThe findings from the study show that 20% of the respondents said that the level of motivation ofthe employees, 15% of them said that the regulatory framework of the sector affects theperformance of the institution yet 15% of the respondents said that the performance of themicrofinance institutions depends on the level of competition in the sector however 50% of therespondents attributed the performance of the microfinance institutions to the range of theproducts offered by the microfinance institutions to the clients.4.4.2 Table 14: How these factors have affected the performance of microfinance institution.How the factors affect performance Frequency PercentageMany products offered by the MFI allows customers variety 10 25%thus having more clients and increased profitabilityThe spread out of the MFI allows them to tap from the 16 40%several clients.The level of technology used in the microfinance affects the 8 20%time of service delivery.Too much competition in the sector reduces profitability of 6 15%the MFITotal 40 100% 34
  • 47. Source: Primary dataThe findings from the tale show that 25% of the respondents said that many products offered bythe MFI allows customers variety thus having more clients and increased profitability, 40% ofthe respondents said the spread out of the MFIs allows them to tap from several clients thusincrement in the profitability yet 20% of the respondents said that the level of technology used inthe microfinance affects the time of service delivery yet 15% of the respondents said that toomuch competition in the sector reduces profitability of the MFI.4.4.3 Table 15: Do you think these factors play the pivotal role on performance of microfinance institutions or it’s the management style of the institution that plays the pivotal role?Factor playing the pivotal role Frequency PercentageThe other factors other than management style. 16 40%The management style plays a pivotal role as 20 50%it’s the pillar for every activity.Not sure 4 10%Total 40 100%Source: Primary dataThe findings from table 15 show that 40% of the respondent said that the other factor other than 35
  • 48. the management style of the microfinance institution affect its performance yet 50% of therespondents said that the management style plays a pivotal role as it’s the pillar for every activityin the institution yet 10% of the respondents were not sure of the response to the assertion.4.5.0 How the performance of the microfinance institutions can be improved through sound management.Having discovered the fact that sound management of microfinance institutions is vital to theirperformance, the researcher tried to explore ways of improving the performance of themicrofinance institutions through having sound management in the organization and the findingsfrom the respondents have been tabulated below:4.5.1 Table 16: whether the performance of the microfinance institutions can be improved. Response Frequency Percentage Yes 30 75% No 6 15% Not sure 4 10% Total 40 100%Source: Primary dataOn whether the performance of the microfinance institutions can the findings from table 16 showthat 75% of the respondents agreed to the fact that the performance of the institution can beimproved, 15% of the respondents said no yet 10% of the respondents were not sure on whetherthe performance of the microfinance institutions can be improved or not. 36
  • 49. 4.5.2 Table 17: Showing what should be done about management so as to improve performance of the microfinance institutions.What should be done Frequency PercentageEncourage everybody’s participation in decision making. 18 45%Put in place mechanisms to improve innovation. 5 13%Treating every employee as a valuable resource to the 6 15%microfinance.Put in place several management controls to check on the 8 20%performance of both management and employees.Encourage timely preparation and audit of financial 3 7%statements.Total 40 100%Source: Primary dataThe findings from table 17 show that the 45% of the respondents said that the institution shouldencourage everybody’s participation in decision making so as to allow them appreciate thedecisions taken, 13% said that institutions should put in place mechanisms to improveinnovation, 15% of the respondents said that the management should treat every employee as avaluable resource to the microfinance yet 20% of the respondents said that the institutions shouldput in place several management controls to check on the performance of both management andemployees while 7% of the respondents said that to improve performance the organizationshould encourage timely preparation and audit of financial statements.4.5.3 Table 18: Findings about what should be done to ensure sound management in the microfinance institutions.What should be done Frequency PercentageEnsure appointment of managers with integrity. 15 37.5%Setting of policies to encourage collective administration. 6 15%Empower the audit commit to report on the management 4 10%policies and there adequacy. 37
  • 50. The management of the company should adhere to the 15 37.5effective corporate governance guidelines of BoU.Total 40 100%Source: Primary dataThe findings from table 18 show that 37.5% 0f the respondents say that the companies shouldensure appointment of managers of integrity, 15% of them said that the company should setpolicies in place to encourage collective participation for better performance yet 10%of therespondents said that the company should empower the audit commit to report on themanagement policies and there adequacy and 37.5 of the respondents said that the microfinanceinstitutions should adhere to the effective corporate governance guidelines provided by Bank ofUganda.In conclusion therefore, the findings from the study show that the management of themicrofinance institution has a significant impact of the performance of the institution and needsto be well monitored together with other factors so as to encourage better performance in theentity. 38
  • 51. CHAPTER FIVE SUMMARY OF FINDINGS, DISCUSSIONS AND CONCLUSION5.0 IntroductionThis chapter presents the summary of findings, discussions, conclusions and recommendations inline with findings presented in the chapter four of this research report.5.1 Summary of the study findings;The researcher was focused on investigating the relationship between sound management and theperformance of the microfinance institutions and in order to effectively carry this out, theresearcher was guided by the following objectives.To investigate the management styles used by microfinance institutions and on this theresearcher found out that the microfinance institutions use management styles such asmanagement by wandering around yet over 45% of the respondents said that the institutions usethe value leverage system to manage yet the autocratic system and the persuasive andconsultative styles of management.To examine the impact of sound management on performance and on this the researcher foundout that management of the microfinance institutions is the pillar of the performance of theinstitution as it aids quick decision making, timely preparation of the financial statement andtimely and quick decision making. 39
  • 52. To establish the other factors for the performance of the microfinance institutions and on this theresearcher found out that factors such as the spread out of the microfinance institutions and thetechnology and the competition in the industry as many competitors reduce the performance ofthe entity and adherence to the corporate governace guidelines provided by the microfinanceinstitutions.5.2 Discussion of the findings of the study;The findings from the study were discussed basing on what existed in the field and relating itwith what other individuals and researchers had established in the earlier studies and also whatthe individuals had to say about the study.The researcher found out that 55% of the respondents were female yet 45% were male implyingthat majority of the employees of the institution were female yet majority of them were betweenthe ages of 25 to 35 years of age and this is the period when one has started enjoying his/ hercareer and the members selected from general departments were the majority to give unbiasedinformation needed.On the objective of finding out the management styles used by pride microfinance limited, theresearcher established that the organization uses different styles depending on the objective ofthe management and these style included, autocratic, management by wandering around wherebythe managers keeping moving around to see what the employees are doing, and this was foundout to be the most used, the other style was value leverage where employees are encouraged tocreate value in everything they do, persuasive and consultative styles and the democratic stylesas emphasized by Kamwana (2011) who said that the different styles of management affectperformance of organizations but they need to be used concurrently to improve performance.On the objective of examining the impact of sound management on the performance of themicrofinance institutions, the researcher found out that sound management as proposed by theMicro Finance Capacity Building Framework (UCAP) (2011) enables quick and timelypreparation of financial statements and also encourages quick decision making for better 40
  • 53. performance. Yet Kamwana (2011) argues that sound management helps reduce on the rivalry inthe institution and also provides clear structure for promotion in the organization. It was foundout that the company’s management has the ability to influence significant changes in theorganization and that it was everybody’s objective to make sure that sound management isencouraged in the institution.On determining the other factors for the performance of the microfinance institutions, theresearcher found out other factors such as the level of motivation of the employees, theregulatory framework of the sector, the level of competition in the sector and the productsoffered by the microfinance institutions as some of the other factors that affect its performanceand products such as foreign exchange, price protection and safety of vital documents. This wasalso discussed by Walday (2010) who also argued that the different products provided by theMFIs to their clients have a significant impact on the performance of the institution as it affectsthe number of clients of the institution. Kamwana (2011) further suggested that the differentfactors such as inflation and the level of economic stability affects the performance of the sectorand further impacts on its profitability. He however suggested that the organisation’s shouldensure appointment of employees of integrity to ensure sound management and also encourageemployee involvement in the decision making process.5.3 Conclusions from the study;In conclusion therefore, the researcher found out that sound management is the pillar oforganizational performance as all the other factors rely on it to continue in the institution and thiswas in a way the management style impacts on the foundation of the performance of themicrofinance institution.The researcher also found out that the performance of the institutions is also affected by otherfactors as sound management does not work in a vacuum but in the presence of other factorssuch as the spread out of the institution, the technology and the level of supervision in the sector.5.4 Recommendations from the studyHaving carried out the study in the field and successfully completing the findings, the researchercame up with the following recommendations to help solve the research problem. 41
  • 54. 5.4.1 The researcher said that in order to improve the management of the microfinance so as toimprove performance, the researcher recommends setting up a human resources committee so asto foresee the formulation and implementation of the management policies in the institution.5.4.2 The researcher also recommends that management should use the value leverage systemwhere by the system ensures that everyone, at every level, is focused on improving the outcomesthat they are creating in the organization for continued improvement in performance.5.4.3 Having found out that the products provided by the institution affects its performance, theresearcher recommends introduction of several products in the mix to encourage performancesuch as convenience banking and agency banking to increase the number of clients for themicrofinance institutions to improve performance.5.4.4 The researcher also recommends that the company should encourage the use of moderntechnology so as to encourage speed in the performance of the services to the clients thus be ableto serve several clients at the same time to encourage better performance.5.4.5 The researcher also recommends that the institution should treasure the employees that ithas in the organization so as to motivate them to work towards the achievement of the objectivesdetermined by the company and also use systems such as supervision and management bywandering around to enhance performance and reduce risks of losses.5.5 Suggested areas for further research,The researcher proposes further research to be carried out in the following fields as per thefindings from this study. • The impact of microfinance institutions on the livelihood of the people of Uganda. • The factors for the performance of the microfinance institutions. • The impact of audits on the performance of the microfinance institutions. • The relationship between microfinance spread out and performance. 42
  • 55. ReferencesAMFIU (2008).Development of Uniform Performance Indicators and Reporting Standards for the Micro Finance Industry in Uganda.Working Document, 3rd Draft, January 2002.Bank of Uganda (2010). The Annual Supervision Report Issue, (No. 2, December 2010). Kampala.Bank of Uganda/GTZ (1998).“Proposals for Bank of Uganda Policy Statement on MFI Regulation.”Foster, (2010) Managing Quality, 4/edition Oxford Publishers.Internet: http://www.finance.go.ug/documents.html. accessed 21st march 2012J. Ledgerwood, D Burand and G Braun (eds) (November 2002). The Micro Deposit- Taking Institutions Bill 2002.Summary of Workshops and Information Exchange Events.Kamwana ,(2011), Making Institutions Support Private Sector Growth.” BMK Publishers, KampalaManagement Science , Volume. 51, No. 7, July, 2005 Tim Baldenius and Stefan ReichelsteinMicro Finance Capacity Building Framework (UCAP). (Draft) Internet: http://www.msepu.go.ug/publication.htm.Micro and Small Enterprises Policy Unit, Ministry of Finance, Planning and Economic Development (2002). “Highlights of the National Baseline Survey on the Outreach of Micro-finance Services in Uganda.” 43
  • 56. Ministry of Finance, Planning and Economic Development [MFPED, (2001)].Ministry of Finance, Planning and Economic Development (2000, July). “Medium-TermCompetitive Strategy for the Private Sector (2000-2005):Poverty Eradication Action Plan (PEAP, 2001-2003). Kampala.The Apex Sub Committee of the Uganda Micro finance Forum (2011). The UgandaThe Apex Sub Committee of the Uganda Micro finance Forum (2009). Expanding theOutreach of Sustainable Micro finance in Uganda: Implementation Plan. Internet:http://www.msepu.go.ug/publication.htm.The Republic of Uganda (2003). Acts supplement to the Uganda Gazette. No 20 Vol.XCVI, 2nd May 2003. Entebbe.Walday Amha (2008)Ocici (2012) 44
  • 57. Appendix 1RESEARCH QUESTIONNAIRE Dear respondent,I am NABUUKALU CATHERINE, a third year student pursuing Bachelor of Science inAccounting & Finance Degree of Kyambogo University. As part of my academic requirement, Iam carrying out research on the topic “Sound management and performance of microfinanceinstitutions” with the case study of Pride microfinance (MDI) ltd. You have therefore beenpurposively identified as a resourceful person in providing the required information. The purposeof this research is purely academic and the information you will give will be anonymouslytreated with confidentiality. SECTION A: 1.0 BACKGROUND INFORMATION1.1. Gendera) Male b) Female1.2. Age bracketa) Below 20b) 20years to 35 yearsc) Above 35 years1.3. Department in the organization;a) Accounting department 45
  • 58. b) Top managementc) General staffd) General Staff 1.4. Duration taken in the organization. a) 0-5 years b) 5-10 years c) Above ten years. SECTION B 2.0 Investigating the management styles used by microfinance institutions.2.1 Which of the following management styles are applied in your company? a) Autocratic b) Value leverage c) Management by wandering around d) Laissez faire e) Democratic f) Persuasive and consultative2.2 Do you think the management styles applied in your company are effective? a) Agree b) Disagree c) Not sure 46
  • 59. 2.3 What do you partake of the management style of the organization? a) The management is very autocratic b) The management of the MFI encourage innovations c) The management manages mainly by wandering around. d) The management respects every employee in the organization2.4 Which personnel have the responsibility of ensuring sound management in the company? a) The human resource committee b) The human resource manager c) The managing director d) Everyone plays his/ her part to ensure sound management in the institution. SECTION C3.0 examining the impact of sound management on performance of MFIs3.1 Do you think the management style applied in the company has an impact on the performance of the institution? a) Yes b) No c) Not sure3.2 How does sound management affect the performance of micro finance institutions? a) Enables quick and timely preparation of financial statements b) Quick and timely decision making is encouraged 47
  • 60. c) Leads to reduced levels of rivalry in the firm d) Provides a clear structure of promotion in the firm.3.3 Do you think the management of the institution has the authority to implement vital changes? a) Yes b) No c) Not sure SECTION D4.0 Determining the other factors affecting the performance of microfinance institutions.4.1 Which of the following factors affect the performance of microfinance institutions?a) Level of motivation of the employeesb) The regulatory framework of the sectorc) The level of competition in the sectord) The products offered by the microfinance institution to its clients.4.2 How do these factors affect the performance of microfinance institutions?a) Many products offered by the MFI allows customers variety thus having more clients andincreased profitabilityb) The spread out of the MFI allows them to tap from the several clients.c) The level of technology used in the microfinance affects the time of service delivery. 48
  • 61. d) Too much competition in the sector reduces profitability of the MFI4.3 Do you think these factors play the pivotal role on performance of microfinance institutions or it’s the management style of the institution that plays the pivotal role?a) The other factors other than management style.b) The management style plays a pivotal role as it’s the pillar for every activity.c) Not sure4.4 do you think the performance of the Microfinance institutions can be improved?a) Yesb) Noc) Not sure4.5 What should be done about management so as to improve performance of the microfinance institutions?a) Encourage everybody’s participation in decision making.b) Put in place mechanisms to improve innovation.c) Treating every employee as a valuable resource to the microfinance.d) Put in place several management controls to check on the performance of both management and employees.e) Encourage timely preparation and audit of financial statements.4.6 What should be done to ensure sound management in the microfinance institutions? a) Ensure appointment of managers with integrity. b) Setting of policies to encourage collective administration. 49
  • 62. c) Empower the audit commit to report on the management policies and there adequacy. d) The management of the company should adhere to the effective corporate governance guidelines of Band of Uganda. END Thanks so much for your precious time in answering this questionnaire May God bless you.APPENDIX 2TIME SCHDULEA Gaunt chart showing how time was utilized during the study. 50
  • 63. TASK PERIOD DEC JAN FEB MAR APRIL MAY JUNE JULY AUG 2011 2012 2012 2012 2012 2012 2012 2012 2012DefiningresearchproblemLiteraturesearchingWritingtheproposalDesigningdatacollectiontoolsPre-testingtoolsDatacollectionDataanalysisReportwritingPrintingandsubmitting 51
  • 64. APPENDIX 3BUDGET ESTIMATEA table showing the budget estimate during the studyITEM No ITEM QUANTITY UNIT PRICE AMOUNT(UG shs)1 Type setting 100 pages 400 40,0002 Printing 400 pages 100 40,0003 Transport 40,0004 Fees to experts 2 30,000 60,0005 Internet 50 hours 10,000 50,0006 Photocopying 400 pages 100 40,0007 Miscellaneous 20,0008 Telephone 120 minutes 180 21,6009 Food 40,000 TOTALS 341,600 52
  • 65. Appendix 4Research letter 53

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