THE ROLE OF FINANCIAL INSTITUTIONS IN SAVINGS MOBILIZATION: THE CASE OF PRIDE MICROFINANCE UGANDA LTD

BY NAMARA EMILY 07/U/12684/E T

RESEARCH REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE RE!UIREMENTS FOR THE A"ARD OF THE DEGREE OF BACHELOR OF COMMERCE OF MA#ERERE UNIVERSITY$

AUGUST 2011

DECLARATION

I NAMARA EMILY do hereby declare that this research report is my original piece of work and has not been submitted for any other or similar award in any academic institution.

Signed: N%&%'% E&()* 07/U/12684/E T

Date:

APPROVAL
This is to certify that this report on The Role of inancial Institutions in Sa!ings "obili#ation$ The case of %ride "icrofinance &ganda 'imited( has been under my super!ision and is now ready for submission to "akerere &ni!ersity for the award of the degree of bachelor of commerce.

Signed: M/+$ NABIDDO "INNIE )Super!isor*

Date:

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DEDICATION
I dedicate this work to my late mother +atukunda Imelda$ "y uncles$ "y ,unties$ "y sister 'ubango -arol and her lo!ely daughter -asie$ and "y special friend 'ubega "oses.

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ACKNOWLEDGEMENT
I am so thankful to the ,lmighty .od who has made it possible$ under all circumstances$ for me to carry out this research. I am so grateful to my super!isor "/s. +abiddo 0innie for her academic guidance$ time1 encouragement and patience that has seen me through$ making this work a success. Thank you for your super!ision. Special thanks go out to my belo!ed family members$ and my guardians &ncle 2en$ 3amukama$ Da!is$ Robert$ ,untie ,nnet$ ,untie -arol and her family$ "y sister -arol$ "y special friend 'ubega "oses for their support$ lo!e$ ad!ice and encouragement throughout the period of my study. "ay .od reward you with lots of blessings4 I lastly wish to e5tend my sincere gratitude toward my friends 'i# 2$ 'i#mo$ %rossy$ Da!is$ +obert$ all my group members and all those who ha!e tirelessly guided and encouraged me at all times throughout my course. Thank you !ery much and may almighty .od reward you abundantly4

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TABLE OF CONTENTS
CONTENTS PAGE

DECLARATION.............................................................................................................. i APPROVAL................................................................................................................... ii DEDICATION............................................................................................................... iii ACKNOWLEDGEMENT................................................................................................. iv TABLE OF CONTENTS.................................................................................................. v CONTENTS PAGE ........................................................................v

LIST OF TABLES........................................................................................................... x LIST OF ABBREVIATIONS............................................................................................ xi MFI: Micro Finance In !i!"!ion.................................................................................... xi SPSS: S!a!i !ica# $ac%a&e 'or Socia# Scien!i ! ..........................................................xi ABSTRACT................................................................................................................. xii C(APTER ONE............................................................................................................. ) INTROD*CTION........................................................................................................... ) ).) Bac%&ro"n+ !o !,e !"+-...................................................................................... ) ).. ).1 ).2 S!a!e/en! o' !,e $ro0#e/............................................................................... P"r$o e o' !,e !"+-........................................................................................ . O03ec!ive o' !,e !"+-.................................................................................... 1 ............................................................................................ 1

).4 Re earc, 5"e !ion ).6

Sco$e o' !,e !"+-........................................................................................... 2

).7 Si&ni'icance o' !,e !"+-...................................................................................... 2 C(APTER TWO............................................................................................................ 4 LITERAT*RE REVIEW................................................................................................... 4 ..) In!ro+"c!ion ......................................................................................................... 4

...

T,e conce$! o' 'inancia# in !i!"!ion .................................................................4

An or&ani8a!ion9 :,ic, /a- 0e ei!,er 'or;$ro'i! or non;$ro'i!9 !,a! !a%e /one- 'ro/ c#ien! an+ $#ace i! in an- o' a varie!- o' inve !/en! ve,ic#e 'or !,e 0ene'i! o' 0o!, !,e c#ien! an+ !,e or&ani8a!ion. Co//on exa/$#e o' 'inancia# in !i!"!ion are re!ai# 0an% 9 :,ic, !a%e +e$o i! in!o a'e%ee$in& an+ " e !,e/ !o /a%e #oan !o o!,er c" !o/er 9 an+ in "rance co/$anie 9 :,ic, +o no! !a%e +e$o i! 9 0"! $rovi+e &"aran!ee o' $a-/en! i' a cer!ain i!"a!ion occ"r in exc,an&e 'or a $re/i"/ an+ /icro 'inance in !i!"!ion !,a! are %no:n 'or cre+i! a+vance/en! an+ avin& /o0i#i8a!ion <D/i!ri e! a#9 )==)>. .............................................................................4 ..1 T,e conce$! o' avin& /o0i#i8a!ion ....................................................................4 ..2 T,e ro#e o' 'inancia# in !i!"!ion in avin& /o0i#i8a!ion ......................................6 ..4 S!ra!e&ie 'inancia# in !i!"!ion !o /o0i#i8e avin& in r"ra# area .......................= ..6 Conc#" ion.......................................................................................................... ). C(APTER T(REE....................................................................................................... )1 MET(ODOLOG?........................................................................................................ )1 1.) In!ro+"c!ion ....................................................................................................... )1 1.. Re earc, +e i&n................................................................................................. )1 1.1 S!"+- $o$"#a!ion............................................................................................. )1

1.2 Sa/$#e i8e9 a/$#in& /e!,o+ an+ a/$#in& $roce+"re .................................)2 1.4 Da!a o"rce........................................................................................................ )2 1.6 Da!a co##ec!ion in !r"/en! an+ /e!,o+ ..........................................................)2 1.7 Da!a co##ec!ion $roce+"re................................................................................... )2 1.@ Da!a $roce in&9 ana#- i an+ $re en!a!ion ......................................................)4

................................................................................................................................ )4 C(APTER FO*R......................................................................................................... )6 Pre en!a!ion9 Ana#- i an+ Di c" ion o' Fin+in& ....................................................)6

2.) In!ro+"c!ion........................................................................................................ )6 T,i c,a$!er inc#"+e !,e $re en!a!ion9 ana#- i an+ +i c" ion o' 'in+in& in accor+ance :i!, !,e !"+- o03ec!ive . (o:ever9 !,e 0ac%&ro"n+ in'or/a!ion o' re $on+en! i $re en!e+ 'ir !. ................................................................................ )6

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2.) T,e re $on e ra!e o' re $on+en! ....................................................................)6 Ta0#e 2.):T,e re $on e ra!e o' re $on+en! ...........................................................)6 2.. De/o&ra$,ic c,arac!eri !ic ............................................................................)7

Ta0#e 2..: Re $on e 0- &en+er...............................................................................)7 Ta0#e 2.1: Re $on e 0- a&e .................................................................................)7 Re "#! in Ta0#e 2.1 ,o: !,a! !,e a&e &ro"$ o' .A;1A -ear $ar!ici$a!e+ /ore in !,e !"+- an+ co"#+ 0e +"e !o !,e 'ac! !,a! $ri+e /icro 'inance e/$#o-ee /ore o' -o"n& &ra+"a!e . (o:ever9 !,e e ,ave a #i!!#e ex$erience in avin& /o0i#i8a!ion. )7 Ta0#e 2.2: T,e :or%in& $o i!ion o' re $on+en! .....................................................)7 Ta0#e 2.4: T,e $erio+ e/$#o-ee ,ave $en! in !,e or&ani8a!ion ..........................)@ Re "#! in Ta0#e 2.4 ,o: !,a! /o ! re $on+en! ,ave :or%e+ 'or #e !,an a -ear9 'o##o:e+ 0- !,o e !,a! ,ave :or%e+ 'or ); . -ear . T,e e re "#! ,o: !,a! !,e in'or/a!ion :a $rovi+e+ 0- /ain#- !,e ne:#- e/$#o-e+ an+ !,i $re en!e+ a $ro0#e/ o' !,e/ no! rea##- ,avin& $rovi+e+ a+e5"a!e an+ re#evan! in'or/a!ion ince !,e- are ne: on !,e 3o0 an+ !i## "n+er &oin& on 3o0 !rainin& !o 0e :e## ver e+ o' !,e or&ani8a!ion. ................................................................................................. )@ 2.1 T,e #eve# o' avin& /o0i#i8a!ion in Pri+e Micro Finance ..................................)@ Ta0#e 2.6: S,o:in& !,e /o ! ervice o''ere+ 0- Pri+e Micro Finance.......................)@ Ta0#e 2.7: S,o:in& !,e co//on 'or/ o' avin& /o0i#i8a!ion o''ere+ 0- Pri+e Micro Finance. ......................................................................................................... )= Ta0#e 2.@: S,o:in& 'ac!or !,a! a''ec! !,e #eve# o' avin& /o0i#i8a!ion in Pri+e Micro 'inance .................................................................................................................... .A Re "#! in Ta0#e 2.@ ,o: !,a! !,e #eve# o' inco/e o' c#ien! i !,e /o ! in'#"encin& 'ac!or !o Pri+eB avin& /o0i#i8a!ion9 'o##o:e+ 0- !,e n"/0er o' +e$en+en! in !,e c#ien!B 'a/i#-9 !,en !,e $o#i!ica# environ/en!. T,i i/$#ie !,a! Pri+e /icro 'inance ,a !o $a- /"c, a!!en!ion !o !,e inco/e #eve# o' c#ien! 9 !,e n"/0er o' +e$en+an! in !,e ,o" e,o#+ an+ !,e $o#i!ica# environ/en! in or+er !o increa e !,eir #eve# o' avin& . .................................................................................................................. .A Ta0#e 2.=: S,o:in& $ro/o!iona# !oo# " e+ 0- Pri+e !o $ro/o!e i! ac!ivi!ie ..........A Re "#! in Ta0#e 2.= ,o: !,a! o' !,e a0ove $ro/o!iona# ac!ivi!ie " e+ !o /o0i#i8e avin& 9 /e+ia a+ver! 9 #o&o 9 0ran+ na/e an+ e+"ca!iona# ca/$ai&n are " e+ 0- Pri+e /icro'inance o' :,ic, /e+ia a+ver! i !,e /o ! $ro/o!iona# ac!ivi!- " e+. Lo&o 9 0ran+ na/e 9 e+"ca!iona# ca/$ai&n are " e+ a! a #e er ex!en!................)

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Ta0#e 2.)A: S,o:in& !ra!e&ie " e+ 0- Pri+e /icro 'inance !o /o0i#i8e avin& . . ..) Re "#! in Ta0#e 2.)A ,o: !,a! !,e /o ! !ra!e&ie " e+ 0- Pri+e /icro 'inance !o /o0i#i8e avin& in or+er o' i/$or!ance areC o''erin& a :i+e ra&e o' 'inancia# in !r"/en! 9 $ro/o!ion o' Pri+e ac!ivi!ie 9 in!ro+"c!ion o' ne: $ro+"c! an+ e+"ca!ion an+ en i!i8a!ion o' i! c#ien! . .................................................................. Ta0#e 2.)): S,o:in& !,e e''ec!ivene o' o/e o' !,e !ra!e&ie " e+ 0- Pri+e /icro 'inance !o /o0i#i8e avin& ..................................................................................... .. Re "#! in Ta0#e 2.)) ,o: !,a! :i+e $rea+ an+ acce i0#e ne!:or% an+ in!ro+"c!ion o' ne: $ro+"c! are !,e /o ! e''ec!ive !ra!e&ie in /o0i#i8in& avin& co/$are+ !o !,e ex!en ion o' :or%in& ,o"r . Ex!en ion o' :or%in& ,o"r ,a no! 0een " e+. T,ere'ore Pri+e nee+ !o a# o $a- /"c, a!!en!ion on !,e ex!en ion o' :or%in& ,o"r !o a##o: 0" ine $eo$#e +e$o i! !,eir /one- in !,e 0an% an+ !,e en+ o' !,e :or%in& ,o"r . T,i i o 0eca" e /o ! 0" ine e c#o e #a!e in !,e evenin& a! aro"n+ 6$/. T,i /a- re5"ire o$era!ion "n!i# !,i !i/e in or+er !o ca$!"re !,e e +e$o i! ,ence a !ra!e&- !,a! co"#+ 0e " e+ !o increa e on !,eir #eve# o' avin& /o0i#i8e+.................................................................................................................. .. 2.4 Re#a!ion ,i$ 0e!:een Pri+e /icro 'inance !ra!e&ie 'or avin& /o0i#i8a!ion an+ avin& /o0i#i8a!ion................................................................................................. .. W,ere ...................................................................................................................... .1 P !,e corre#a!ion coe''icien!...................................................................................... .1 +. i !,e +i''erence 0e!:een i!e/ 5"are+..............................................................1

Ta0#e 2.).: Co/$"!in& !,e re#a!ion ,i$ 0e!:een Pri+e /icro 'inance !ra!e&ie 'or avin& /o0i#i8a!ion an+ avin& /o0i#i8a!ion..........................................................1 (ence $ D);6x)4E6<6. ;)>........................................................................................ .1 C(APTER FIVE........................................................................................................... .4 Di c" ion o' Main Fin+in& 9 Conc#" ion an+ Reco//en+a!ion .............................4

4.) In!ro+"c!ion........................................................................................................ .4 In !,i c,a$!er9 a "//ar- o' 'in+in& 9 conc#" ion an+ reco//en+a!ion are $re en!e+ in accor+ance :i!, re earc, 5"e !ion . T,e re earc, 5"e !ion an :ere+ :ere: ....................................................................................................................... .4 4.. Di c" ion o' /ain 'in+in& ................................................................................4

4.1 Conc#" ion ......................................................................................................... .7 4.2 Reco//en+a!ion ............................................................................................. .7

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i.A! !,e cor$ora!e #eve#9 Pri+e /icro 'inance nee+ !o i/$rove i! !ra!e&ie 'or avin& /o0i#i8a!ion !o inc#"+e i/$rove/en! in c" !o/er care "c, a i/$rovin& :or%in& ,o"r :,ere nece ar-. ............................................................................ .7 4.4 Area 'or '"r!,er re earc,.................................................................................... .7

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LIST OF TABLES
Table 6.7:The response rate of respondents................................8rror: Reference source not found Table 6.2: Responses by gender..................................................8rror: Reference source not found Table 6.9: Responses by age.....................................................8rror: Reference source not found Table 6.6: The working positions of respondents.......................8rror: Reference source not found Table 6.:: The period employees ha!e spent in the organi#ation........8rror: Reference source not found Table 6.;: Showing the most ser!ice offered by %ride "icro inance 8rror: Reference source not found Table 6.<: Showing the common form of sa!ings mobili#ation offered by %ride "icro inance. .....................................................................................................8rror: Reference source not found Table 6.=: Showing factors that affect the le!el of sa!ings mobili#ation in %ride "icro finance .....................................................................................................8rror: Reference source not found Table 6.>: Showing promotional tools used by %ride to promote its acti!ities.....8rror: Reference source not found Table 6.7?: Showing strategies used by %ride micro finance to mobili#e sa!ings 8rror: Reference source not found Table 6.77: Showing the effecti!eness of some of the strategies used by %ride micro finance to mobili#e sa!ings..........................................................................8rror: Reference source not found Table 6.72: -omputing the relationship between %ride micro finance strategies for sa!ings mobili#ation and sa!ings mobili#ation....................................... 8rror: Reference source not found

LIST OF ABBREVIATIONS
" I: "icro inance Institution S%SS: Statistical package for Social Scientists &.: &ganda

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ABSTRACT
0illingness to sa!e meanwhile is belie!ed to depend on the ease of access to sa!ings instruments$ the attracti!eness of such instruments and the pre!ailing economic conditions$ yet microfinance institutions in &ganda seem not to ha!e fa!orable conditions for such acti!ities. The main study ob@ecti!e was to e5amine the performance le!el of the pride microfinance in respect to sa!ings mobili#ation in rural areas. It has been noted that most banks which are the main financial institutions that ha!e engaged in sa!ings mobili#ation ha!e mainly concentrated in the urban areas lea!ing out the rural areas and this has affected the ability to mobili#e sa!ings in such areas$ howe!er this problem can be sol!ed by promoting microfinance institutions to concentrate their acti!ities in rural areas but this has not been e5ploited by them. indings re!ealed that the performance le!el of pride microfinance in respect to sa!ings mobili#ation in the rural areas re!ealed a low le!el of performance. Recommendations are that go!ernment should put in place adeAuate policies for financial institutions to mobili#e adeAuate sa!ings from the rural areas1 basically offerings high interest rates could world to attract more customers. Key words: Financial Institutions, Savings Mobilization, Pride Microfinance Uganda Ltd.

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CHAPTER ONE INTRODUCTION

1$1 B%,-.'/012 3/ 345 +302* inancial institutions are those institutions which mobili#e funds from the public and place them in financial assets such as deposits$ loans and bonds rather than tangible property$ )www.in!estorswords.com*. "a@ority of financial institutions ha!e engaged themsel!es in sa!ings mobili#ation and ha!e played a significant role in pro!iding !arious sa!ings ser!ices and products such as bonds$ accounts holdings with interest yielding and they ha!e played a !ital role in sa!ings mobili#ation.

Sa!ings can be defined as income not spent on consumption. In case of salaried worker$ itBs that proportion of income not spent on consumption. %eople sa!e for a !ariety of reasons including putting aside money for a rainy day$ out of plan habit and targeting of some big purchase in future. ,mong the factors that determine sa!ing beha!ior is ability to sa!e which depends on disposable income$ propensity to sa!e$ access to financial institutions and the type of sa!ings were found to determine the form of sa!ings held. 0hile most efforts to sa!e are !oluntary$ others are compulsory as in the case of social security contributions$ )2agon#a$ 2??7*.

The system of financial intermediation can affect economic performance and growth directly through the role it plays in sa!ings mobili#ation. In particular the financial intermediation channels sa!ings into the most producti!e in!estment pro@ects and thus contributes to higher rates of growth$ )"ato!u$ 2?7?*. &ganda as a country faces low sa!ings rates in spite of stable macroeconomic stabili#ation effort. It has the lowest sa!ings rate of any de!eloping region$ the capacity to sa!e is mainly determined by income le!el$ rate of income growth and the 7

dependency ratio i.e. the ratio of population under 7; or abo!e ;? years old to that of the working age population$ )'oay#a et al$ 2???*. 0illingness to sa!e meanwhile is belie!ed to depend on the ease of access to sa!ings instruments$ the attracti!eness of such instruments and the pre!ailing economic conditions$ )0right$ 7>>>* yet "icro finance institutions in &ganda seem not to ha!e fa!ourable conditions for such acti!ities. 1$2 S3%35&513 /6 345 7'/8)5&

inancial institutions ha!e time and again played a crucial role in sa!ings mobili#ation in the economy1 howe!er they are more concentrated in urbani#ed areas than rural areas$ which limit their sa!ings mobili#ation. ,s noted by "ato!u$)2?7?* in the book CDomestic resource mobili#ation in Sub D Saharan ,frica the case of &gandaBs stated that most banks which are the main financial institutions that ha!e engaged in sa!ings mobili#ation ha!e mainly concentrated in the urban areas lea!ing out the rural areas and this has affected the ability to mobili#e sa!ings in such areas. Eowe!er this problem can be sol!ed by promoting microfinance institutions to concentrate their acti!ities in rural areas but this has not been e5ploited by them$ )"ato!u$ 2?7?*. Therefore this research looks at the !arious factors that affect sa!ings mobili#ation$ role of financial institutions in sa!ings mobili#ation and lastly the relationship between the role of financial institutions and sa!ings mobili#ation so as to identify strategies that can be employed by Is to mobili#e sa!ings in rural areas. 1$9 P0'7/+5 /6 345 +302*

The purpose of the study aimed at establishing why sa!ings mobili#ation has not been fully and potentially e5ploited by the numerous financial institutions especially micro finance institutions in the rural areas.

1$4

O8:5,3(;5+ /6 345 +302*

The study was guided by the following research ob@ecti!es:

i.

To e5amine the performance le!el of the pride micro finance in respect to sa!ings mobili#ation in rural areas.

ii.

To find out what strategies ha!e been employed by pride "icrofinance especially in the rural areas to increase their sa!ings mobili#ation le!els.

iii.

To establish the relationship between %ride micro finance strategies for sa!ings mobili#ation and sa!ings mobili#ation

1$< R5+5%',4 =05+3(/1+ The study answered the following research Auestions: i. 0hat is the performance le!el of the %ride "icro mobili#ation in rural areasF ii. 0hat strategies ha!e been employed by pride "icrofinance especially in the rural areas to increase their sa!ings mobili#ation le!elsF iii. 0hat is the relationship between %ride micro finance strategies for sa!ings mobili#ation and sa!ings mobili#ationF inance in respect to sa!ings

1$6

S,/75 /6 345 +302*

The research is on %ride microfinance &ganda 'imited$ the study focuses on the role of financial institutions in sa!ings mobili#ation as the independent and dependent !ariable respecti!ely. inancial institutions in!ol!es those institutions which mobili#e funds from the public and place them in financial assets such as deposits$ loans$ and bonds rather than tangible property. They include commercial banks$ microfinance institutions to mention but a few. 2ut this study particularly focused on %ride "icro inance one of the financial institutions whose operational scope is rural based The research co!ered the period of 2??= to 2?7? in which financial institutions ha!e increased in the country yet rural sa!ings mobili#ation remains low.

1$7 S(.1(6(,%1,5 /6 345 +302*$ i. The findings of the research will enable pride microfinance to know what kind of strategies$ procedures$ and policies to employ to increase their sa!ings mobili#ation potential in rural areas. ii. The study will help go!ernment in formulating policies and regulations that will fa!or sa!ings mobili#ation by financial institutions in rural areas. iii. To the researcher$ the study will impro!e her basic research skills from which she can base to conduct applied research for purposes of career and practice de!elopment.

CHAPTER T"O LITERATURE REVIE"

2$1 I13'/20,3(/1 This chapter re!iews related literature to the study. The re!iew focuses on the concepts of financial institutions$ sa!ings mobili#ations$ how financial institutions mobili#e sa!ings$ financial institutionBs role in sa!ings mobili#ation and strategies that financial institutions to increase sa!ings mobili#ation. 2$2 T45 ,/1,573 /6 6(1%1,(%) (1+3(303(/1+ ,n organi#ation$ which may be either forGprofit or 1/1>7'/6(3$ that takes &/15* from clients and places it in any of a !ariety of (1;5+3&513 ;54(,)5+ for the benefit of both the client and the organi#ation. -ommon e5amples of financial institutions are '53%() 8%1-+$ which take 257/+(3+ into safekeeping and use them to make )/%1+ to other customers$ and (1+0'%1,5 ,/&7%1(5+$ which do not take deposits$ but pro!ide guarantees of payment if a certain situation occurs in e5change for a 7'5&(0& and micro finance institutions that are known for credit ad!ancement and sa!ings mobili#ations )Dmitri et al$ 7>>7*.

2$9 T45 ,/1,573 /6 +%;(1.+ &/8()(?%3(/1 Sa!ings are cash or physical products set aside for future use. Therefore sa!ings mobili#ation is a way to keep cash or physical purposes n amounts suitable for in!estment purposes )"puga$ 7>>>*.

%eople in rural and other lowGincome communities$ although poor$ can sa!e when they are guided and encouraged. In rural communities$ sa!ings are made through traditional credit rotation groups$ or purchase of domestic animals )goats$ pigs$ chickens or cows*. 8!ery microGenterprise needs in@ection of capital or funds which may be ownerHs money or a loan. 0hen a loan is used$ it is someone else who has done the sa!ing. "icro enterprises$ like other businesses$ con!ert sa!ings )of the owners and of others* into in!estment$ in the generation of wealth. 2$4 T45 '/)5 /6 6(1%1,(%) (1+3(303(/1+ (1 +%;(1.+ &/8()(?%3(/1 In financial institutions sa!ings are transformed into deposits$ which may either be normal sa!ings or time fi5ed deposits. These constitute the bulk of their working capital$ if on lent. In other words the core resources used in financial institutions are comprised of deposits from the public$ which is one of their primary resources of funds. or this reason financial institutions ha!e a task of attracting customers to keep deposits with them. This is known as sa!ings mobili#ation. It in!ol!es tapping the sa!ings the public may hold by pro!ision of se!eral assets in which people can sa!e$ )"puga$ 7>>>*.

inancial institutions pro!ide a system where sa!ers deposit their amounts and borrowers can access such amounts. This ensures an efficient transformation of mobili#ed funds into real producti!e capital. inancial institutions comprise of both the formal and informal sector.

The mobili#ation of sa!ings and channeling credit to the lower income group in both the rural and urban areas is done by the informal sector$ )Dmitri et al$ 7>>7*. They play a significant role in sa!ings mobili#ation for e5ample microfinance institutions though they are not allowed to

mobili#e deposits1 they fill the gap left by formal institutions )3asekende$ 7>>=*. The formal sector includes central bank$ commercial banks$ credit institutions$ de!elopment banks and so on.

or financial intermediaries$ sa!ings mobili#ation increases the supply of internally generated funds that can be in!ested in housing$ microenterprise and small business loans$ )www.woccu.org/education/sa!imgs*.

Sa!ings is a foundational pillar in inclusi!e financial system. Sa!ings contributes to financial inclusion at the client$ microfinance institutions and industry le!els. Sa!ings ser!ices strengthen the finances of lowG income households$ sa!ings deposits strengthen the funding base or microfinance and are the basis for a competiti!e$ efficient and sound microfinance industry$ ),lliance for financial inclusion policy/ formali#ing microsa!ings$2?7?*.

In a micro le!el$ thereBs of course an e5tensi!e body of academic research to e5plain how a well de!eloped )deep* financial market contributes to economic growth in a country$ an industry and in indi!idual firms$) 'e!ine$2??:*. urther it shows that financial de!elopment reduces income ineAuality in general$ has a disproportionately positi!e impact on the income of the poor$ and that it contributes to po!erty alle!iation$ )2eck$et.al$2??<*.

" Is that intermediate deposits are the best positioned to sustain growth and inno!ation. " Is that are funding growth by mobili#ing local sa!ings as regulated financial intermediaries ha!e deri!ed benefits from depositGbased funding in at least three ways. irst$ deposits tend to be more stable and scalable funding source relati!e to other options. "icrocredit organi#ations typically face challenges with wholesale funding related to finance costs$ term structure$ currency risk$ administrati!e effort and ultimately getting enough capital to fund growth that keeps up with <

demand. ,lso the recent international financial crisis has demonstrated the liAuidity risks associated with o!er dependence on foreign debt funding. In addition to the stability of sa!ings in most markets$ itBs also a less e5pensi!e funding source.

The second benefit manifests in incenti!es that dri!e a " Is approach to growth and e5pansion. Deposit based institutions link their asset growth to deposits and therefore growth is based on ser!ice to sa!ers and the perception of sa!ers of the integrity to " I. These " Is tend to be disciplined$ ser!iceGoriented and cautions about their reputation. Deposit funding also links the " I e!olution to economic realities since " Is can only grow if they are successful in intermediating effecti!e market demand for sa!ings and credit.

inally depositGbased " Is en@oy customer loyalty since customers that sa!e in an institution ha!e a sense of trust and ownership that credit clients donBt necessary ha!e. or some customerBs sa!ings may be the first step to accessing credit and other ser!ices later on$ ), I policy/formali#ing microsa!ings$ 2?7?*.

To increase sa!ings$ policies should be focused on the ma@or determinates of sa!ings in the economy$)"ukwanason$ 7>>6*. The mobili#ation of small and micro sa!ings respond to demand if the poor and is commercially !iable source of funds. It should be noted that successful sa!ings mobili#ation reAuires a macroeconomic en!ironment that is conduci!e. inancial institutions

need to put in place strategies that are dynamic and aggressi!e to encourage sa!ings by enhancing public confidence$ pro!ide cost effecti!e schemes$ and most importantly they must be seen by the public especially to the concerned not only with balancing sheets but promoting peoples welfare and prosperity$ )2agon#a$ 2??7*.ItBs important to understand why people sa!e$

in doing so financial institutions will create products that are suitable and complement with the needs of those who sa!e$) in scope &g$ 2??>*

-ommunities in &ganda ha!e always raised capital for farming$ petty trading and other income generating acti!ities through sa!ings mobili#ation. It is this traditional arrangement that modern micro finance institutions are trying to modify in the mobili#ation of sa!ings. I!er the last decade$ micro finance institutions ha!e found those poor households are interested in a !ariety of sa!ings ser!ices and products. Deposit ser!ices allow low income household to sa!e for large e5penses like dowries$ or school fees$ accumulate funds for future in!estment as purchasing a cow$ or prepare for periods such as rainy periods when they may ha!e little or no income1 this is according to the microfinance e5perience with sa!ings mobili#ations and that they are basically two reasons why microfinance should mobili#e sa!ings. 'ocally mobili#ed sa!ings are potentially the largest and the most immediate a!ailable source of finance for some microfinance institutions$ and there is a !ast demand for institutions sa!ings ser!ices at the local le!els.

2$< S3'%35.(5+ 6(1%1,(%) (1+3(303(/1+ 3/ &/8()(?5 +%;(1.+ (1 '0'%) %'5%+ ,ccording to sa!ings mobili#ation as a financial instrument and its rele!ance to the poor by "arguerite Robinson$ 2?7?$ the following preconditions are needed by ". .I is for sa!ings mobili#ation. They are grouped into outside ". .Is and within the ".I. s control. Iutside " I -ontrols are controls that are found outside " I regulation and they include enabling macro economy and some degree of political stability )no hyper inflation or continuing ser!e warfare*$ appropriate regulatory en!ironment$ public super!ision. 0ithin ". .I control1 these are controls that operate within the microfinance institutions and they include good track record of accountable ownership$ effecti!e go!ernance$ consistently good management of funds >

and allocation of full time high le!el committed management plus a financially sound with a high rate of loan reco!ery and consistently good returns.

The system of financial intermediation can affect economic performance and growth directly through the role it plays in sa!ings mobili#ation. %ride microfinance has played this !ital role of sa!ings mobili#ation especially in the rural areas. It offers !arious sa!ings accounts and it is a deposit taking institutions. It has facilitated the growth and empowerment of women who ha!e been beneficiaries because it offers a wide range of appropriate instruments. ,ccording to 0iniwiski$ )7>>>* financial instruments play a !ital role in facilitating sa!ings because of appropriate instruments.

Sa!ings play a crucial role in financial management strategies of the poor. Deposit facilities make it easier for poor clients to turn small amounts of money into Cuseful lump sumsB$ enabling them to smooth consumption and mitigate the effects of economic shocks$) Rutherford$ 2??7*. Secure sa!ings also can pro!ide a measure of independence to socially and economically !ulnerable indi!iduals$ notably women and children and unlike credit1 the benefits of sa!ings are not limited to the economically acti!e. ,lthough significant research has document the benefits of sa!ings to the poor$ the microfinance sector remains focused largely on credit deli!ery. unders and go!ernment often donBt reali#e how !ital assetG building policies and that sa!ings mobili#ation can bring many benefits to the poor clients and microfinance pro!iders )e.g. stable funding and protection from the foreign e5change risk.

Sa!ings are fundamental to sustainable economic de!elopment. Sa!ings are by far the most freAuent source of funding to microfinance startup and e5pansion. They also enable households to build for the future and better prepare for une5pected emergencies. 0occu credit union 7?

sa!ings mobili#ation profit in 'atin ,merica ha!e demonstrated that lower income people will substantially increase their sa!ings deposit if pro!ided with con!enient ser!ice$ market returns and security for their sa!ings. Jet millions of people throughout the region lack access to safe$ reliable and con!enient sa!ings ser!ices$)www.woccu.org/education/sa!ings*.

,ccording to www.woccu.org/education/sa!ings the following key principles and is de!eloping operational guidelines and tools to be utili#ed by all microfinance institutions for mobili#ing sa!ings. %reconditions for sa!ings mobili#ation include legal deposits: is there an appropriate legal framework in place to identify which institutions are able to recei!e deposits and what recourse sa!ers ha!e to reco!er their depositsF ,re you authori#ed to capture sa!ingsF Do you ha!e a charter and by laws establishedF Is an effecti!e system of super!ision in placeF

85ternal analysis1 under this one has to consider the following$ is there a market for sa!ing products in your geographic locationF 0hich institutions are capturing sa!ings nowF ,lso one has to look at prudential a discipline thatBs to say do you understand the minimum standardsF Ea!e you established the core financial disciples of delinAuency control$ loan loss pro!isions$ liAuidity reser!es and capital reser!ing to protect client sa!ingsF To mention a few.

The following procedures for efficient sa!ings mobili#ation would benefit e!ery financial institution especially ". .Is in collecting sa!ings and they are completion of sa!ings registration form with passport si#e photographs and payment of fees$ maintaining sa!ings accounts for indi!idual and group$ issuances of sa!ings pass books and opening of ledger records$ issuances of receipts for e!ery deposit within their means and lastly fle5ibility of deposits time and withdrawal rates.

77

2$6 C/1,)0+(/1 Sa!ings mobili#ation reAuires a macroeconomic en!ironment that is conduci!e$ )2ategaka$ 7>>=* and policy makers must ensure an effecti!e regulatory framework that entails adeAuate protection of sa!ings and pro!ide incenti!es for sound management. 2ut these seem to be lacking in &gandan financial institutions. The study therefore will assess the e5tent to which financial institutions in &ganda possess fa!orable macroeconomic en!ironment conditions to enhance sa!ings mobili#ation in rural areas where they are currently performing below par.

72

CHAPTER THREE METHODOLOGY

9$1 I13'/20,3(/1 This chapter co!ers research methodology and specifically research design$ the type of data that was adopted in carrying out research$ sources of data$ data collection instruments$ data collection procedure$ measurement of !ariables$ data presentation and analysis methods as well as limitations that were encountered during the study and how they were o!ercome. 9$2 R5+5%',4 25+(.1 The study adopted a case study design. , case study is a method for learning about a comple5 instance based on a comprehensi!e understanding of that instance obtained by e5tensi!e description and analysis of that instance taken as a whole in its conte5t$ )-helimsky$ and 2??7*. or this study %ride microfinance 'td &ganda headAuarters as a single site is chosen as a case study. 9$9 S302* 7/70)%3(/1

The study was conducted at %ride "icro inance 'td$ &ganda headAuarters in 3ampala. The population comprised of workers of pride " I both at the top management$ middle management and lower management le!els.

79

9$4 S%&7)5 +(?5@ +%&7)(1. &534/2+ %12 +%&7)(1. 7'/,520'5 The sample si#e comprised of 2? respondents from the management of %ride microfinance in!ol!ing top management$ middle management and lower cadre. Ine of the sampling methods was stratified as per management le!els to in!ol!e employees at different le!els of management$ simple random sampling was adopted in identifying respondents from each le!el to minimi#e bias.

9$< D%3% +/0',5 2oth primary and secondary data was used. The primary data was sourced from the management of %ride " I. The secondary data was sourced from e5isting information regarding financial institutions and sa!ings mobili#ations. This was sourced from records kept by %ride " I such as registration books showing the number of sa!ers$ and types of accounts held. 9$6 D%3% ,/))5,3(/1 (1+3'0&513+ %12 &534/2+ Data was collected through self administered Auestionnaires and inter!iews. 2oth close ended and open ended Auestions were in!ol!ed in the Auestionnaire for the former to collect precise information about the study !ariables and for the later to clarify on the responses gi!en in the close ended Auestions. The open ended Auestions also stimulated inter!iews between the researcher and the respondent.

9$7 D%3% ,/))5,3(/1 7'/,520'5 The research presented a letter of introduction to the management of %ride microfinance limited headAuarters showing the reasons of research. Kuestionnaires were administered by the researcher and she filled as responses were being obtained directly from the respondent. This 76

was a one by one respondent at a time until all the respondents were co!ered. In the process$ the researcher asked Auestions where clarity was reAuired.

9$8 D%3% 7'/,5++(1.@ %1%)*+(+ %12 7'5+513%3(/1 Raw data was thoroughly edited$ coded and entered in to S%SS data editor for analysis. "a@or analytical statics included freAuencies and percentages while tables were the basic methods for data presentation. Themes were de!eloped in accordance with study ob@ecti!es for the analysis of Aualitati!e data. The relationship between !ariables was determined using spearmanBs rank correlation coefficient.

7:

CHAPTER FOUR P'5+513%3(/1@ A1%)*+(+ %12 D(+,0++(/1 /6 F(12(1.+

4$1 I13'/20,3(/1 This chapter includes the presentation$ analysis and discussion of findings in accordance with the study ob@ecti!es. Eowe!er$ the background information of respondents is presented first. The study set out to answer the following Auestions: i. 0hat is the performance le!el of the %ride "icro mobili#ation in rural areasF ii. 0hat strategies ha!e been employed by pride "icrofinance especially in the rural areas to increase their sa!ings mobili#ation le!elsF iii. 0hat is the relationship between %ride micro finance strategies for sa!ings mobili#ation and sa!ings mobili#ationF 4$1 T45 '5+7/1+5 '%35 /6 '5+7/12513+ Iut of the 2: target respondents$ responses were only got from 2? respondents as illustrated in Table 6.7 below: T%8)5 4$1:T45 '5+7/1+5 '%35 /6 '5+7/12513+ R5+7/1+5+ F'5=051,* ,nswered Auestionnaires 7= &nanswered Auestionnaires 2 T/3%) 20 Source: Field data. Results in Table 6.7 show that out of the sample si#e of 2?$ 7= answering the Auestionnaires. P5',513%.5 >?.? 7?.? 100$0 assisted the researcher by inance in respect to sa!ings

7;

4$2 D5&/.'%74(, ,4%'%,35'(+3(,+ T%8)5 4$2: R5+7/1+5+ 8* .5125' G5125' F'5=051,* P5',513%.5 "ale 77 ;7.7 emale < 9>.> T/3%) 18 100$0 Source: Field data. Results in Table 6.7 show that the ma@ority of respondents );7.7L* were males compared to females. This implies that males participated more in the study than females. T%8)5 4$9: R5+7/1+5+ 8* %.5 A.5 .'/07 A(1 *5%'+B 2?G9? 9?G6? ,bo!e 6? years T/3%) Source: Field data. F'5=051,* 7? 2 ; 18 P5',513%.5 ::.; 77.7 99.9 100$0

Results in Table 6.9 show that the age group of 2?G9? years participated more in the study and could be due to the fact that pride micro finance employees more of young graduates. Eowe!er$ these ha!e a little e5perience in sa!ings mobili#ation. T%8)5 4$4: T45 C/'-(1. 7/+(3(/1+ /6 '5+7/12513+ M%1%.5&513 L5;5) Top le!el "iddle le!el 'ower le!el T/3%) Source: Field data F'5=051,* 9 77 6 18 P5',513%.5 7;.< ;7.7 22.2 100$0

Results in Table 6.6 show that most respondents were from the middle le!el management followed by lower le!el and then top management. This implies that the information pro!ided concerning the research topic was in relation to what %ride microfinance uses$ applies concerning the Auestions that were in the Auestionnaire. This is because they are in!ol!ed in the daily routine operations of the organi#ation and they are updated of the ongoing changes in the organi#ation hence pro!iding adeAuate and rele!ant information.

7<

T%8)5 4$<: T45 75'(/2 5&7)/*55+ 4%;5 +7513 (1 345 /'.%1(?%3(/1 P5'(/2 (1 *5%'+ 'ess than a year 7G2 2G9 9G6 ,bo!e 6 Total Source: Field data. F'5=051,* > : 7 7 2 18 P5',513%.5 :? 2<.= :.; :.: 77.7 100$0

Results in Table 6.: show that most respondents ha!e worked for less than a year$ followed by those that ha!e worked for 7G 2 years. These results show that the information was pro!ided by mainly the newly employed and this presented a problem of them not really ha!ing pro!ided adeAuate and rele!ant information since they are new on the @ob and still under going on @ob training to be well !ersed of the organi#ation. 4$9 T45 )5;5) /6 +%;(1.+ &/8()(?%3(/1 (1 P'(25 M(,'/ F(1%1,5 T%8)5 4$6: S4/C(1. 345 &/+3 +5';(,5 /665'52 8* P'(25 M(,'/ F(1%1,5 S5';(,5 -redit/ loans Deposits/ sa!ings facilities %ension / social security 'easing facilities Insurance ser!ices Ithers T/3%) Source: Field data F'5=051,* 7? 6 G 7 2 7 18 P5',513%.5 ::.; 22.2 ? :.; 77.7 :.; 100$0

Results in Table 6.; show that most the most ser!ice offered by %ride "icro inance is credit or loan facilities$ followed by deposit facilities$ then insurance ser!ices. 'easing and other were rated eAually in the forth position. ,mong others$ respondents stated managing fi5ed deposits accounts. This implies that %ride "icro finance clients significantly en@oy the ser!ices of credit and deposit facilities. This could be e5plained by the fair terms and conditions that apply to credit and good interest rates offered on deposits. 7=

T%8)5 4$7: S4/C(1. 345 ,/&&/1 6/'& /6 +%;(1.+ &/8()(?%3(/1 /665'52 8* P'(25 M(,'/ F(1%1,5$ F/'& /6 +%;(1.+ &/8()(?%3(/1 Securities %hysical assets -ash Ithers T/3%) Source: Field data. F'5=051,* ? ? 7; 2 18 P5',513%.5 ?.? ?.? ==.> 77.7 100$0

Results in Table 6.< show that most respondents stated that %ride micro finance mobili#es sa!ings mainly through indi!idual cash$ followed by other forms represented by 77.7L and the other forms of sa!ings included group sa!ings$ offering western union ser!ices.

7>

T%8)5 4$8: S4/C(1. 6%,3/'+ 34%3 %665,3 345 )5;5) /6 +%;(1.+ &/8()(?%3(/1 (1 P'(25 M(,'/ 6(1%1,5 F%,3/'+ R5+7/1+5+ Strongly agree 7? ::.; ; 99.9 6 22.2 72 ;;.< 77 ;7.7 = 66.6 ,gree ; 99.9 > :?.? 77 ;7.7 ; 99.9 : 2<.= > :?.? +ot sure 2 77.7 9 7;.< 9 7;.< ? ? 2 77.7 7 :.; Disagree ? ? ? ? ? ? ? ? ? ? ? ? Strongly disagree ? ? ? ? ? ? ? ? ? ? ? ? Total 7= 7?? 7= 7?? 7= 7?? 7= 7?? 7= 7?? 7= 7??

"onetary and credit polices Inflation rate +umber of dependents in the clients family %olitical en!ironment iscal policies)e.g.* ta5ation Source: Field data

freAuency %ercentage reAuency %ercentage reAuency %ercentage reAuency %ercentage reAuency %ercentage reAuency %ercentage

Results in Table 6.= show that the le!el of income of clients is the most influencing factor to %rideBs sa!ings mobili#ation$ followed by the number of dependents in the clientBs family$ then the political en!ironment. This implies that %ride micro finance has to pay much attention to the income le!el of clients$ the number of dependants in the household and the political en!ironment in order to increase their le!el of sa!ings.

T%8)5 4$D: S4/C(1. 7'/&/3(/1%) 3//)+ 0+52 8* P'(25 3/ 7'/&/35 (3+ %,3(;(3(5+ T//)+ 2? F'5=051,* P5',513%.5

'ogos "edia ad!erts 2rand names 8ducational campaigns %articipation in social acti!ities Ithers T/3%) Source: Field data.

: 77 7 7 ? ? 18

2<.< ;7.7 :.; :.; ?.? ?.? 100$0

Results in Table 6.> show that of the abo!e promotional acti!ities used to mobili#e sa!ings$ media ad!erts$ logos$ brand names and educational campaigns are used by %ride microfinance of which media ad!erts is the most promotional acti!ity used. 'ogos$ brand names$ educational campaigns are used at a lesser e5tent. T%8)5 4$10: S4/C(1. +3'%35.(5+ 0+52 8* P'(25 &(,'/ 6(1%1,5 3/ &/8()(?5 +%;(1.+ F%,3/'+ R5+7/1+5+ Iffering a wide rage of financial instruments %romotions of %ride ,cti!ities Introduction of new products 8ducation and sensiti#ation Impro!ement of customer ser!ices 85tension of working hours Source: Field data Strongl y agree 77 ;7.7 7? ::.; >.? :?.? ; 99.9 ? ? ? ? ,gree < 9=.< = 66.6 > :?.? 72 ;;.< 2 77.7 ? ? +ot sure ? ? ? ? ? ? ? ? ? ? ? ? Disagree ? ? ? ? ? ? ? ? ? ? ? ? Strongly disagree ? ? ? ? ? ? ? ? 7; >=.> 7= 7?? Total 7= 7?? 7= 7?? 7= 7?? 7= 7?? 7= 7?? 7= 7??

freAuency %ercentage reAuency %ercentage reAuency %ercentage reAuency %ercentage reAuency %ercentage reAuency %ercentage

27

Results in Table 6.7? show that the most strategies used by %ride micro finance to mobili#e sa!ings in order of importance are1 offering a wide rage of financial instruments$

promotion of %ride acti!ities$ introduction of new products and education and sensiti#ation of its clients. T%8)5 4$11: S4/C(1. 345 5665,3(;515++ /6 +/&5 /6 345 +3'%35.(5+ 0+52 8* P'(25 &(,'/ 6(1%1,5 3/ &/8()(?5 +%;(1.+ Total 0ide spread and ,ccessible network 85tension of working hours Introduction of new products Source: Field data freAuency %ercentage reAuency %ercentage reAuency %ercentage 8ffecti!e 7= 7?? ? ? 7= 7?? +ot effecti!e ? ? 7= 7?? ? ? +ot sure ? ? ? ? ? ? 7= 7?? 7= 7?? 7= 7??

Results in Table 6.77show that widespread and accessible network and introduction of new products are the most effecti!e strategies in mobili#ing sa!ings compared to the e5tension of working hours. 85tension of working hours has not been used. Therefore %ride needs to also pay much attention on the e5tension of working hours to allow business people deposit their money in the bank and the end of the working hours. This is so because most businesses close late in the e!ening at around ;pm. This may reAuire operations until this time in order to capture these deposits hence a strategy that could be used to increase on their le!el of sa!ings mobili#ed.

4$< R5)%3(/1+4(7 853C551 P'(25 &(,'/ 6(1%1,5 +3'%35.(5+ 6/' +%;(1.+ &/8()(?%3(/1 %12 +%;(1.+ &/8()(?%3(/1 The relationship between pride micro finance acti!ities and sa!ings mobili#ation was determined using spear man rank correlation coefficient. It is gi!en by the formula:

22

0here P the correlation coefficient d2 is the difference between items sAuared n is the number of item being correlated. T%8)5 4$12: C/&703(1. 345 '5)%3(/1+4(7 853C551 P'(25 &(,'/ 6(1%1,5 +3'%35.(5+ 6/' +%;(1.+ &/8()(?%3(/1 %12 +%;(1.+ &/8()(?%3(/1 S%;(1.+ S3'%35.(5+ &/8()(?%3(/1 R5 Ry R5GRy Md d2 Iffering a wide rage of financial instruments -redit/ loans 7 7 ? ? %romotions Deposits/ of %ride sa!ings ,cti!ities facilities 2 2 ? ? Introduction %ension / of new social products security 9 ; G9 > 8ducation and 'easing sensiti#ation facilities : 9 2 6 Impro!ement of customer Insurance ser!ices ser!ices 6 6 ? ? 85tension of working Ithers )fi5ed hours deposits* ; : 7 7 Total 7: Source: Field data. Eence p M7G;57:/;);2 G7* M ?.:<7 Results in Table 6.72 show a positi!e moderate relationship between sa!ings mobili#ation strategies employed by %ride micro finance and sa!ings mobili#ation. That is sa!ings mobili#ation strategies employed by pride accounts for only 92.<L )?.:<72 57??* of sa!ings mobili#ation in %ride micro finance in rural areas. This shows that their le!el of sa!ings

29

mobili#ed is low so to increase sa!ings the strategies of e5tension of working hours$ participation in social acti!ities and education campaigns should be strengthened and put in place.

26

CHAPTER FIVE D(+,0++(/1 /6 M%(1 F(12(1.+@ C/1,)0+(/1+ %12 R5,/&&512%3(/1+

<$1 I13'/20,3(/1 In this chapter$ a summary of findings$ conclusions and recommendations are presented in accordance with research Auestions. The research Auestions answered were: The study set out to answer the following Auestions: The study set out to answer the following Auestions: i. 0hat is the performance le!el of the %ride "icro mobili#ation in rural areasF ii. 0hat strategies ha!e been employed by pride "icrofinance especially in the rural areas to increase their sa!ings mobili#ation le!elsF iii. 0hat is the relationship between %ride micro finance strategies for sa!ings mobili#ation and sa!ings mobili#ationF <$2 D(+,0++(/1 /6 &%(1 6(12(1.+ The study aimed at e5amining the role of financial institutions in sa!ings mobili#ation as in the case of %ride "icrofinance &ganda 'td. indings about the performance le!el of %ride inance in respect to sa!ings

"icrofinance in respect to sa!ings mobili#ation in the rural areas re!ealed a low le!el of performance. "ost of the sa!ings are in form of property$ but not in form of assets managed by "icrofinance. This is e5plained by the fact that sa!ings mobili#ation strategies employed by pride accounts for only 92.<L of sa!ings mobili#ed by pride microfinance in rural areas$ )field data$ 2?77*.

The strategies employed by %ride "icrofinance in the rural areas to increase their sa!ings mobili#ation included offering a wide range of financial instruments$ promotion of pride acti!ities$ introduction of new products$ education and sensiti#ation of clients about sa!ings 2:

mobili#ation. ,lthough these strategies are dynamic and aggressi!e to encourage sa!ings by enhancing public confidence$ the earlier studies of 2agon#a )2??7*$ sa!ings mobili#ation has still remained low for %ride "icrofinance in rural areas. This low sa!ings mobili#ation is e5plained by the fact that although %ride is a microfinance deposit taking institution$ most of the microfinance institutions are @ust filing the gap left by formal institutions if they allowed to mobili#e sa!ings$ the earlier studies of 3asekende$ )7>>=*.

Despite the fact that sa!ings mobili#ation in the rural areas is still low$ for the case of %ride "icrofinance$ their intermediation in sa!ings mobili#ation has promoted the strengthening of the funding base for microfinance and the basis for a competiti!e$ efficient and sound microfinance industry$ ), I$ 2?7?*.

The system of financial intermediation can affect economic performance and growth directly through the role it plays in sa!ings mobili#ation. %ride "icrofinance has played this !ital role of sa!ings mobili#ation especially in the rural areas although the le!el of sa!ings is still low. It offers !arious sa!ings accounts and itBs a deposit taking institution. It has facilitated the growth and empowerment of women who ha!e been beneficiaries because it offers a wide range of appropriate instruments. ,ccording to 0iniwiski$ )7>>>* financial instruments play a !ital role in facilitating sa!ings because of appropriate instruments.

2;

<$9 C/1,)0+(/1 rom the study findings$ it can be concluded that: The performance le!el of %ride micro finance in respect to sa!ings mobili#ation is still !ery low gi!en that most clients are interested in in!esting in real property than in cash form. The strategies employed by %ride "icro finance in mobili#ation of sa!ings are lacking in that they donBt include important ones such as customer care and e5tension of working hours where necessary. The sa!ings mobili#ation for %ride micro finance is low due to lacking sa!ings mobili#ation strategies. <$4 R5,/&&512%3(/1+ i. ,t the corporate le!el$ %ride micro finance needs to impro!e its strategies for sa!ings mobili#ation to include impro!ement in customer care such as impro!ing working hours where necessary. ii. 85tension of working hours until ;pm. Since most of their sa!ers are mainly business people and their working hours closure of the dayBs business is normally in the e!ening at around ;pm working hours until such a time gi!es them the opportunity to deposit their money in the bank since they are operating until such a time.

<$< A'5% 6/' 60'345' '5+5%',4 .o!ernment policy and sa!ings mobili#ation strategies by financial institutions in the rural areas1 thatBs to say the strategies employed should encourage sa!ings and impro!e their standards of li!ing.

2<

REFERENCES
,lwisniwiski$ E$ )7>>:*$ -hallenges of "icro sa!ings. Deutsche .essellch "obili#ation concepts and !iews from the ur field$ Internet. 2agon#a .$ )2??7*$ Ea!e the banks "obili#ation Strategies led to disintermediation of sa!ings$ The &ganda 2ankers Nol. > +o. 7. &ganda Institute of 2ankers. inscope &ganda$ )2??>*$ Results of a +ational Sur!ey In Demand$ usage and ,ccess To inancial Ser!ices In &ganda$ inal report. The &ganda Institute of 2ankers 'ibrary.

.raham 0right$ )7>>>*$ The case for !oluntary$ open access sa!ings facilities and why 2angladeshBs largest " Is were slow to react$ &ganda Institute of 2ankers 'ibrary$ 992.?67: 0RI. 3asekende '$ )7>>=*$ Sa!ings in the conte5t of "acro 8conomic %olicy Issues. The 8ast ,frica 85perience. www.gt#.de/dokumente/bib/>=G76>6 'e!ine Ross$ )2??:*$ inance and .rowth: Theory and 8!idence$ in %hilppe ,ghion and Ste!en Durlayf$ eds. Eandbook of 8conomic .rowth. The +etherlands: 8lse!ier Science$ &ganda Institute of 2anker 'ibrary. "arguerite Robinson$ )2?77*$ Sa!ings "obili#ation as a inancial Instrument and its Rele!ance for the poor. http://www.worldbank.org/financial/assets/images/mtp "ato!u O."$ )2?7?*$ Domestic Resource "obili#ation in SubDSaharan ,frica$ the case of &ganda. www.dfid.go!.uk/R6D/%D "puga %$ )7>>>*$ Sa!ings "obili#ation in &ganda$ Oournal of -apital "arkets ,uthority Nol. 9. +o. 7

2=

"ukwanason E$ )7>>6*$ Interest %olicy and Sa!ings In!estment %rocess a policy stance. The &ganda banker Nol. :. +o. 7. &ganda Institute of bankers. Rani D$ )2??<*$ -ountry le!el Sa!ings ,ssessment tool$ &ganda Institute If 2anking ,nd inancial Ser!ices 'imited. Ross E$ )2??:*$ inance and .rowth: Theory and 8!idence in %hilippe$ &ganda Institute of

2ankers 'ibrary. Rutherford S$ )2??7*$ The poor and their money. I5ford &ni!ersity press$ &ganda Institute of 2ankers 'ibrary.

2>

!UESTIONNAIRE
TO BE ANS"ERED ON THE ROLE OF FINANCIAL I+STITUTION IN SAVINGS

MOBILIZATION
D5%' '5+7/12513$ This Auestionnaire is aimed at collecting data for the abo!e research topic. The study will not be used for anything other than for academic purposes and will be treated with confidentiality. %lease tick as appropriate A$ D5&/.'%74(, ,4%'%,35'(+3(,+$ 7. 0hat is your .ender statusF a* emale 2. 0hat is your age rangeF a* , bo!e 6o years b* 9?G6? Jears c* 2?G9? Jears 9. Eow long ha!e you been employed in this organi#ationF PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP.. 6. 0hat is your working position le!elF a* Top le!el b* "iddle le!el c* Ither B$ S%;(1.+ &/8()(?%3(/1 :. 0hich ser!ices do your offer to customersF a* -redit loans b* Deposits /Sa!ings facilities c* %ension / Social security d* 'easing facilities e* Insurance ser!ices f* ,ny other please mention PPPPPPPPPPPPPPPP. b* "ale

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;. 0hich form of sa!ings does your organi#ation offer to clientsF a* Securities b* %hysical assets c* inancial ,ssets )cash* c* IthersPPPPPPPPPP.. <.To what e5tent do you agree that the following factors affect your clients le!els of performance in sa!ings. Strongly ,gree a*'e!el of income b* "onetary and credit policies c*Inflation rates d* +umber of dependants 8?%olitical instability f* iscal policies )eg. Ta5ation* Ithers please specifyPPPPPPPPPPPPPPP PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP. =. 0hich promotional acti!ities does pride use to promote its acti!itiesF a* 'ogos b* "edia ad!ertisement c* 8ducational campaigns d* 2rand names e* %articipation in social ,cti!ities Ithers please specifyPPPPPPPPPPP........................................................ PPPPPPPPPPPPPPPPPPPP. C$ R/)5 /6 7'(25 &(,'/6(1%1,5 97 ,gree +ot sure Disagree Strongly Disagree

>. To what e5tent to you agree that pride uses the following strategies to mobili#e sa!ingsF Strongly ,gree +ot Sure Disagree Strongly Disagree a* Iffering a wide rage of financial instruments b* %romotions of %ride ,cti!ities c* Introduction of new products d* 8ducation and sensiti#ation e* Impro!emen t of customer ser!ices *85tension of working hours 7?. Eow effecti!e ha!e the following strategies been in mobili#ing sa!ingsF 8ffecti!e +ot 8ffecti!e +ot Sure a* 0ide spread and accessible network b*85tension of working hours c*Introduction of new products 77. 0hat strategies are being employed to impro!e rural areas in sa!ings mobili#ationF PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP..............

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