CHAPTER THREE

RESEARCH METHODOLOGY

3.0. Introduction

This chapter presents information on research design, area of study, study population, sampling Design sampling size, Data collection methods and instruments, Quality control methods, Data management and processing, Data analysis, Ethical considerations and finally limitations of the study.

3.1 Research Design

This section focused on the research techniques which were adopted and used for the study with the aim of achieving the research objectives. A research design is defined as an overall plan for research undertaking and it provides the glue that holds the research project together.

The study used a case study design to investigate the effect of credit management on financial performance in Microfinance Support Centre, Mbale branch. The case study design was used in that its findings were based on the data collected from a geographic area of MSC which was used as a case study. The research employed both qualitative and quantitative methods. The qualitative approach was used in comprehending views obtained from respondents through questionnaire and interviews. The quantitative approach on the other hand was used in computing data that involved figures hence this enabled the use of percentages in data analysis.

3.2 Area of the study

The area of the study was at Microfinance Support Centre, Mbale branch. Because it strategically located and the researcher had easy access to the respondents. The area of the study refers to the anthropological or sociological research which is intended to gather and relate data on various aspects of a geographical region and its inhabitants, as natural resources, history, language, institutions, economic characteristics and Primary investigation into human ecology.

3.3 Study Population

The study population consisted of 60 respondents from the different departments which included finance (2), Human Resource Administration (5), loans officers (15), Information communication technology (02), Marketing and corporate Affairs (13), legal officer (10), customers (10) and internal audit (05). Therefore, the study population was60 out of which the sample size selection for the study was made.

3.4 Sampling procedures.

3.4.1 Sample size and Selection.

Sekaran, (2003) identified that, sampling is the process of choosing the research units of the target population, which are to be included in the study.  A sample size of 52 respondents was selected out the population of the study population of 60 which comprised of finance (5), Human Resource Administration (2), loans officers (15), Information communication technology (02), Marketing and corporate Affairs (13), legal officer (10), customers (10) and internal audit (05).  The sample size was determined using Morgan and Krejcie table as given by Amin, (2005) (Appendix III)

Table 3.1: Showing category, population, sample size and sampling technique.

Source: Primary data (2021)

3.4.2 Sampling techniques.

The study used both probabilistic and non-probabilistic techniques. These included simple random and purposive sampling techniques.

A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen. A simple random sample is meant to be an unbiased representation of a group. Simple random sampling was used for the study because it was considered a fair way of selecting a sample from a given population since every member is given equal opportunities of being selected.

Purposive sampling was used for selecting heads of Human Resource Administration, finance and respondents from ICT departments.  This was preferred by the researcher because ;it  excluded people who were unsuitable for the  study  and remained  with  the most suitable candidates , it is  less time consuming, reduces  the costs for carrying out the sampling project,  the results of purposeful sampling are usually expected to be more accurate than those achieved with an alternative form of sampling.

3.5 Sources of data.

Two basic sources of data considered were both primary and secondary.

The study used both primary and secondary data sources. The instruments were preferred for their greater convenience in the context of time, stability, uniformity and consistency.

The primary data refers to the data collected by the researcher herself. In order to achieve her objectives data was collected mainly using the structured questionnaires and interview guides from the respondents.

Secondary data refers to already available data set, this was obtained from documents, journals, online data sets in order to supplement on the primary data collected by the questionnaires and the interview guides.

3.6 Data Collection Methods and Instruments

To collect a large quantity of data, the following data collection methods were used: questionnaire, face-face interviews, and documentary review.

3.6.1 Data Collection Methods

Questionnaires:

A structured questionnaire was used to collect data and in this study, questionnaires were used to collect data from members and staff of MSC on issues surrounding credit management and financial performance. Questionnaires were used because apart from being easier to administer, they more reliable and also easier to analyze (Amin, 2003). Questionnaires are often used to collect data from large samples because they are cheap to administer, free from bias of the researcher, provide adequate time for respondents to fill them (Kothari, 2006). Using an introductory letter from the university, the researcher delivered the blank questionnaire to the selected respondents in Micro finance Support Centre and provided an appropriate time for them to complete them and then she collected them.

Interviews

Face to face interviews were held to collect data from the staff at MSC in order to collect in-depth data on credit management and financial performance. The researcher arranged to meet the respondents in these three categories and held face to face interviews with them. During the process, a set of questions were asked and their responses were written down by the researcher. At the end of the interview process, the researcher went over what had been captured and ensured that no useful information was be left out. 

3.6.2 Data Collection Instruments

Questionnaire.

As an instrument, a 5 point-Likert scale questionnaire was used. It comprised of both open ended and close ended questions. This served to the respondents majorly on appointment who were then required to tick against the provided questions or fill in where necessary. This instrument is good because it has limited choice for respondents there by limiting assumptions and falsifications by respondents.

Interview Guide

As an instrument, an interview schedule was used to collect data from the top SMT, the top management team of the organization. This is because these respondents were ever busy that they were unable to take off time to answer a questionnaire. The interview schedule contained a set of questions that were followed while interviewing the respondents to avoid going off topic. This instrument is good because it minimized differences between interview responses since the guiding questions were pre-determined and interviewees were subjected to the same environments (Canals, 2017).

3.7Quality Control Methods

The instruments of data collection in this study were assessed in terms of validity and reliability to ensure dependability of the results of the study.

3.7.1 Validity

Validity of the instrument was determined by computing the Content Validity Index after rating of the items by the supervisor. The researcher requested the supervisor to rate the items in the data collection instruments as Very Relevant (VR), Relevant (R), Somewhat Relevant (SWR) or Not Relevant (NR). From the rating, the researcher used the formula below to compute the Content Validity Index (CVI), which was an indicator of the level of validity of the instrument.

Formula used:    CVI     = VR + R  

K;           Where VR is for Very Relevant, R for Relevant and K is for total number of items in the instrument.

From the supervisor’s rating, 10 items were rated very relevant; 13 were rated relevant, 5 were rated somewhat relevant and 3 as not relevant. This was out of the 37 items in the instrument. By substitution in the formula above;

CVI     = 10 + 13 = 23   =   0.793

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The value of Content Validity Index (CVI) obtained was interpreted using the George and Mallery (2003) scale. Since the value of CVI obtained was 0.793, which is above 0.7, it indicated good reliability (George and Mallery, 2003).

3.7.2 Reliability

Reliability refers to consistency in delivering results. To ascertain reliability, the researcher pre-tested the research instrument on a reasonable number of staffs within MSC, who were not used in the final data collection process. After pre-testing, the Chronbach’s Alpha formula was used to compute the reliability coefficient which is an indicator of the level of reliability of the instrument (George and Mallery, 2003). A reliability coefficient value of 0.7 was obtained indicating acceptable reliability (George and Mallery, 2003).

3.8 Measurement of variables

The dependent variable of the study; financial performance was measured by Profitability, cash flow and liquidity position.  The independent variables of the study credit management were measured by client appraisal techniques, credit risk control tools and collection policies. A questionnaire with 5 point rating scale as per Likert scale ranging from strongly agree (1) to strongly disagree (5) of Munene, (2000) local measure  was used to measure respondent’s evaluation by asking them the degree of agreement with statements. The measurement scale of 1 up to five on every statement simply measures the strength of the respondents’ opinion on the particular statement. If the respondent ticked 1 it implied that one strongly agrees with the statement, 2 = agrees, 3 = not sure in other words one does not take any side on the statement, 4 = disagrees and 5 = strongly disagrees with the statement under discussion.

3.9 Analysis of Data

Data collected was first cleaned and scrutinized for any missing values before actual analysis was done.

3.9.1 Quantitative Data

Quantitative data collected was centered into the Statistical Package for Social Scientists (SPSS) computer software. The software was commanded to generate descriptive statistics such as frequencies and percentages. Then a correlation analysis was ran using the SPSS software to establish the effect of the Credit Management on financial performance in Microfinance Support Centre, Mbale branch.

3.9.2 Qualitative Data

The qualitative data was analyzed for content and language used by thorough transcribing of recorded interviews looking out for similarities and differences to identify themes and develop categories according to the objectives. Data cleaning, editing and coding of the items in the questionnaire was employed to cross check and interpret qualitative data and generate theoretical relations for making conclusions. The interplay between the findings solicited by both quantitative and qualitative data enabled the researcher to draw conclusions and subsequently make recommendations.

3.10 Ethical Considerations

The researcher respect anonymity of the respondents by ensuring confidentiality of the respondents and the data provided. This was done through assurance that the information they provided was to be purely for academic purposes and that their identity would not be disclosed to anyone. This was highlighted in the introductory part of the questionnaire and before the interview sessions. Lastly but not least, objectivity was considered during report writing to avoid personal bias.

3.11 Limitations of the Study

Organizations are critical about security and disbursement of information pertaining to their operations. The main limitation was in terms of accessing information that was considered classified by Organization authorities. The respondents, especially the top managers tried to refuse to disclose information about their departments. However, through the use of the introduction letter from the university and having an honest discussion on the significance of the study with the branch manager, a harmonious environment was created and permission to access such classified information was granted. The other factor that limited was the response rate (due to loss of some questionnaires) which could affect the reliability of the study. However, in this case, more questionnaires were distributed to ensure that the appropriate sample was attained.

3.12 Conclusion

This chapter clarified on the research design including the approaches adopted. The methodology enabled the researcher to design a plan for the study which acted as guidance for data collection during which ethical issues were seriously observed. A challenge was encountered during the study but was on the other hand be an opportunity to learn from them during the study.