THE EFFECT OF SOCIAL MISSION ON OUTREACH MAXIMIZATION OF MICROFINANCE INSTITUTIONS

A CASE STUDY OF PRIDE MICROFINANCE LTD, MBARARA BRANCH

LIST OF ACRONYMS

BRI Bank Rakyat Indonesia 

CGAP Consultative Group to Assist the Poorest 

LAC Latin America and the Caribbean 

MDI Microfinance Deposit- taking institution 

MENA Middle East and North Africa 

MFIS Microfinance Institutions

SPTF Social Performance Task Force 

ABSTRACT

The study was carried out at pride Microfinance limited, Mbarara branch with the purpose of establishing the effect of social mission on outreach maximization in Microfinance institutions. The study objectives were to assess the benefits of social mission in MFIs, to determine the different types of outreach in MFIs and to establish the relationship between social mission and outreach maximization in MFIs. The study design used descriptive study design which covered 80 participants selected using both purposive and simple random sampling. The researcher employed both qualitative and quantitative to collect data for defining, segmenting, estimating and examining the associative relationship where both closed ended questionnaires and interview guides were used to collected data from women entrepreneurs, leaders and member of saving groups. The study found out that as a result of social mission in Pride microfinance, it has achieved financial sustainability and independence, earned financial revenue, built a relationship with clients, made products and services reach the underserved clients, increased repayment and it’s social responsibility has been promoted. The study findings indicated that the major types of outreach included depth outreach, length of outreach, breadth outreach, worth to users, scope of outreach and cost to users. This implies that there are many kinds of outreach that have been adopted by the institution. Therefore, outreach can be measured in terms of breadth – number of clients served and volume of services (total savings on deposit and total outstanding portfolio) or depth (the socioeconomic level of clients that MFIs reach). A result of social mission there has been an increase in  number of rural clients served, the average loan given out have increased and financial services served have also increased. MFIs that mainly provide individual loans perform better in terms of profitability, but the fraction of poor borrowers and female borrowers in the loan portfolio is lower than for institutions that mainly provide group loans. The study recommended that MFIs must operate efficiently enough that reasonable, affordable and competitive interest rates can be charged to cover these costs. Long term sustainability requires MFIs to manage delinquency, keep their cost of capital low by mobilizing savings, rotate their portfolio efficiently, keep their operating costs to a minimum and most importantly, set interest rates to cover all these costs.

CHAPTER ONE

1.1 Background to the study

Globally, around 700 million people live in extreme poverty today, down from 900 million in 2012 and even 1.85 billion in 1990 (World Bank, 2016). These are decreasing numbers, nevertheless the number of people living in extreme poverty is still extremely high. One possible way to reduce these numbers is microfinance, which is a way of providing financial services to the poorest of the poor. Studies show that lack of access to financial services not only slows down economic growth, but also results in persistent income inequality due to potentially profitable projects that are not realized (Beck & Demirgüç-Kunt, 2008). Microfinance has become increasingly popular since the 1970’s but came known to the world in 2006, when the Grameen Bank and its founder Muhammad Yunus got awarded the Nobel Peace Prize for his efforts to decrease poverty in Bangladesh.

Social mission is in the microfinance industry commonly defined as the ability of an MFI has to effectively translate the institutions social goals into practice. It means that an MFI should not do any harm, and that it is proactive in fulfilling its mission. Do no harm means that the client should not be worse off after the intervention of a MFI due to before. This includes avoiding client indebtedness, not adding unnecessary administration burdens on the clients, and stop transferring risk to the clients. The social goals are outlined in the organizations mission and vision (Leonard, Linder, Faris, Lal & Meggs, 2009). Social mission indicators help MFIs to specify data to collect so they over time can assess and track how well they are achieving its mission (SPTF, 2012).

Outreach is typically used to refer to the effort by MFIs to extend loans and financial services to an ever-wider audience (breadth of outreach) and especially toward the poorest of the poor (depth of outreach). Thus, reaching the poorest is depth of outreach, but reaching large number of people even if they are relatively less poor is breadth of outreach. Outreach means that MFIs want to have an impact on their environment and fight against the poverty in the area they operate in (Abbink, Irlenbusch, & Renner, 2006). 

More than ever before, there is a broad agreement that outreach is important to help MFIs in achieving their social mission (CGAP, 2013a). Microfinance investors are now openly discussing responsible investments; this includes balancing returns and how to reduce the risks of market saturation and over-indebtedness. The heated debates and investors efforts are signaling maturity and investors` wish to move beyond the crises to concrete actions, which will make the sector more responsible (CGAP, 2013b).

There have been some reservations about the need of social mission measures. If there really is a need for a new set of reporting standards and if it is even possible to standardize measures for social mission. Opponents believe that the high demand among the poor for services and that they are relative price insensitive, are enough sufficient proof that microfinance services are socially useful. Thus, the additional assessments will therefore be unnecessary. However, a high demand does not automatically indicate that there is an increase in people`s conditions. One reason why people come back could be due to spiraling indebtedness, meaning that they borrow money to pay back other debts (CGAP, 2007).

There are new challenges in the microfinance sector. A growing microfinance industry and new partnerships that are emerging are resulting in an increasing competition and a financial pressure. This evolving context increases the exposure to risks, and as a consequence, there is no guarantee for the double bottom line of microfinance anymore. There is also a real risk of mission drift (Leonard et al., 2009). In the future, one can expect that there is a decrease in the resources for development assistance from public donors. Yet, there will be a growing interest for microfinance for the private social investors. To report if MFIs have managed the objectives in the double bottom line, it would then be important for them to have similar financial and social objectives. It could also be possible to improve the understanding of possible trade-off between the economic and social returns on investment (Zeller, Lapenu & Greeley, 2003).

There has, for the last decade, been emphasis on the outreach maximization. However, advocates of social mission have argued that it is important with social indicators to keep MFIs focused on their clients and is a key building block for the MFI as an institution. Social indicators will also help MFIs to assess their social results internally and to report to their external stakeholders, especially to donors and investors. If an MFI know how it is performing on its social bottom line, it can help to guide the MFI towards its social mission (Coleman & Rogers, 2009).

Pride Microfinance Ltd (MDI) (Pride) is a Microfinance Deposit- taking institution (MDI) regulated and supervised by Bank of Uganda (BoU) under the MDI Act, 2003 and MDI Regulations, 2004. From inception, Pride has grown to become the leading MDI in Uganda, providing innovative financial solutions to the economically vulnerable people.

1.2 Problem statement

Microfinance institutions have implemented social mission in its operations with the aim to improve its outreach performance. This has improved their performance in terms of number of clients, geographical coverage and profits. However, MFIs have not maximized their outreach since most areas in Uganda are not bankable and some cannot access the financial services as indicated by 37% in the annual report of pride microfinance (Kyeyune, 2016). Therefore, this study sought to assess the effect of social mission on outreach maximization in Microfinance institutions.

1.3 Objectives of the study

1.3.1 General objective of the study

To establish the effect of social mission on outreach maximization in Microfinance institutions. A case study of pride Microfinance limited, Mbarara branch.

1.3.2 Specific objectives of the study

1. To assess the benefits of social mission in MFIs
2. To determine the different types of outreach in MFIs
3. To establish the relationship between social mission and outreach maximization in MFIs

1.4 Research Questions

1. What are the benefits of social mission in MFIs?
2. What are the different types of outreach in MFIs?
3. What is the relationship between social mission and outreach maximization in MFIs?

1.5 Scope of the study

The study aimed at assessing the effect of social mission on outreach maximization in Microfinance institutions. Main emphasis was put on determining the benefits of social mission in MFIs, the indicators of outreach maximization in MFIs and the relationship between social mission and outreach maximization in MFIs. The study was carried out at pride Microfinance limited, Mbarara branch because it is a microfinance institution that carries out social mission and outreaches. The study considered 2014-2016 as the period of data considered in the organization while considering 2006-2016 as the period of body of knowledge to review literature.

1.6 Significance of the study

To policy makers, the study will help to identify the benefits that social mission brings to MFIs, so that more efforts are put to improve its performance.

The findings of the study will be relevant to the management of Pride microfinance limited (strategic and operational plans) in that it will give the milestones towards improving social mission as a strategy to maximize outreach. 

The findings of the study will also enable employees of the organization to appreciate their role towards business development, growth and strategic adoption module for the success of the organization. 

To Pride microfinance ltd, the study will help realize areas of weakness in social mission so that their overall performance are improved

Further researchers will also benefit from the findings of this study since it will provide additional knowledge to the already existing literature. The findings and gaps of this study may act as ground for further research. 

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

The chapter focuses on the related literature of the study. The literature was reviewed basing on the study objectives.

2.1 Benefits of social mission in MFIs

Social mission of investments has become a topical issue in discussions. Social objectives are intentionally pursued and honored (Lapenu et al., 2008). Investors are agreeing that there is a need for action.

Microfinance investors are now openly discussing responsible investments; this includes balancing returns and how to reduce the risks of market saturation and over-indebtedness. The heated debates and investors efforts are signaling maturity and investors` wish to move beyond the crises to concrete actions, which will make the sector more responsible (CGAP, 2013b).

There have been some reservations about the need of social mission measures. If there really is a need for a new set of reporting standards and if it is even possible to standardize measures for social mission. Opponents believe that the high demand among the poor for services and that they are relative price insensitive, are enough sufficient proof that microfinance services are socially useful. Thus, the additional assessments will therefore be unnecessary. However, a high demand does not automatically indicate that there is an increase in people`s conditions. One reason why people come back could be due to spiraling indebtedness, meaning that they borrow money to pay back other debts (CGAP, 2007).

There are new challenges in the microfinance sector. A growing microfinance industry and new partnerships that are emerging are resulting in an increasing competition and a financial pressure. This evolving context increases the exposure to risks, and as a consequence, there is no guarantee for the double bottom line of microfinance anymore. There is also a real risk of mission drift (Leonard et al., 2009). In the future, one can expect that there is a decrease in the resources for development assistance from public donors. Yet, there will be a growing interest for microfinance for the private social investors. To report if MFIs have managed the objectives in the double bottom line, it would then be important for them to have similar financial and social objectives. It could also be possible to improve the understanding of possible trade-off between the economic and social returns on investment (Zeller, Lapenu & Greeley, 2003).

There has, for the last decade, been emphasis on the financial performance. However, advocates of social mission have argued that it is important with social indicators to keep MFIs focused on their clients and is a key building block for the MFI as an institution. Social indicators will also help MFIs to assess their social results internally and to report to their external stakeholders, especially to donors and investors. If an MFI know how it is performing on its social bottom line, it can help to guide the MFI towards its social mission (Coleman & Rogers, 2009).

Outreach enables MFIs to earn financial revenue from loans and other financial services in the form of interest fees, penalties, and commissions. Financial revenue also includes income from other financial assets, such as investment income. An MFI’s financial activities also generate various expenses, from general operating expenses and the cost of borrowing to provisioning for the potential loss from defaulted loans. Profitable institutions earn a positive net income (i.e., operating income exceeds total expenses). For the purpose of this review and to account for the institutional scale of operations, financial revenue and expense indicators as well as returns are compared against the institution’s assets (Jenifer et al, 2005).

The additional criteria have encouraged MFIs to improve their understanding of the simultaneous pursuit of financial and social performance, a “double bottom line”, in tradeoffs between economic and social return on investment (Koning & McKee, n.d.; Zeller, Lapenu, & Greeley, 2003). The social performance of MFIs measures the level of their dedication to fulfilling their social mission (Bédécarrats, Baur, & Lapenu, 2011). This mission is determined by the basic client problem that an unstable family income results in a lack of household security. Thus, these social performance measures are important means for determining the amount of work done by the MFI and where MFI has invested its money to accept visibility from the society.

Building up a relationship with clients helps to minimise operational risk and increases the repayment rate. Economic benefit to clients. Along with financial services for the poor, MFIs need to track and monitor changes and implement practices to verify whether benefits are received by the clients; b. Client participation. Strengthening the social network by the involvement of clients in governance; Social capital/client empowerment. Promoting clients’ empowerment (Stefano, 2011). 

2.2. Different types of outreach in MFIs

Efforts to extend microfinance services to the people who are underserved by financial institutions are classified as outreach. Outreach can be in terms of breadth; number of clients served and volume of services (total savings on deposit and total outstanding portfolio) or depth; the socioeconomic level of clients that MFIs reach (Anne et al., 2005).

2.1. Breadth outreach

According to Mwangi et al (2005) states outreach can be target in terms of number of clients served and volume of services. In 2003, the 163 reporting MFIs in Africa served almost three times as many voluntary savers (6.3million) as borrowers (2.4 million). Worldwide, MFIs reach many more borrowers than savers. The East Asia and Pacific regions mobilize the most voluntary savers because of the presence of the largest MFI in the world, Bank Rakyat Indonesia (BRI; 29.8 million savers). When this formidable outlier is excluded, African MFIs lead MFIs in other global regions in reaching the most savers. More than 70 percent of reporting MFIs mobilize voluntary deposits, demonstrating the “African exception”: Unlike MFIs in the rest of the global regions, African MFIs traditionally have focused on savings services (Anne t al., 2005).

Outreach numbers also vary by MFI type. In Africa, unregulated MFIs tend to be much smaller than their regulated and cooperative counterparts. Indeed, unregulated MFIs account for 22 percent of all reporting MFIs but represent only 11 percent of borrowers and, more tellingly, 4 percent of voluntary savers. The significant outreach to savings clients of regulated and cooperative MFIs underscores the importance of savings products in Africa. Proportionally smaller than their peers, unregulated MFIs reach fewer savers because the regulations in many countries prohibit or limit the mobilization of savings by unregulated institutions (Jenifer, 2005).

2.2. Depth outreach 

Depth outreach focuses the socioeconomic level of clients that MFIs reach (Brown, 2009). By definition, MFIs offer financial services to low-income clients (Patricia, 2008). Some MFIs achieve deeper outreach by targeting the client groups that are most vulnerable such as women and/or people with very low incomes (Isern, 2014).

In 2003, women represented 61 percent of borrowers among the reporting MFIs in Africa. By comparison, women represent an average of 86 percent of borrowers among MFIs in South Asia, 80 percent in Middle East and North Africa (MENA), 76 percent in East Asia and the Pacific, 60 percent in Latin America and the Caribbean (LAC), and 58 percent in Eastern Europe and Central Asia (Mathew, 2012).

Unregulated MFIs serve the highest percentage of women borrowers (Lucie, 2007). Women represent just over 50 percent of borrowers from African cooperatives, 63 percent of borrowers from regulated MFIs, and 69 percent of borrowers from unregulated MFIs. One explanation for the variation is that unregulated MFIs include NGOs and projects that specifically target women.

The average balances of outstanding savings and loans are proxy indicators used to indicate a client’s socioeconomic level. Among reporting African MFIs, the weighted average outstanding loan per borrower is USD 307. In absolute terms, these loans are somewhat larger than those offered by MFIs in the regions of MENA, East Asia and Pacific, and South Asia but significantly smaller than those offered in the Eastern Europe and LAC regions (Table C-1). However, MFIs in Africa manage average savings balances of USD 137 per client, much smaller than MFIs in other regions, with the exception of South Asia (USD 19) and MENA (where MFIs do not offer savings services).

When average loan balance is compared with gross national income (GNI) per capita, the results change slightly. The average loan balance relative to GNI per capita for African MFIs is higher than for MFIs in the MENA, South Asia, and LAC regions. Average loan balances are relatively higher in Africa because per capita income is lower. MFIs in East Africa offer the smallest average loan balances of all African regions, in absolute terms. Southern Africa appears to be reaching lower-income clients when average savings and loan balances are compared with GNI per capita (Lafourcade, 2009).

Anne-Lucie et.al (2005) described that outreach can be measured in terms of breadth – number of clients served and volume of services (total savings on deposit and total outstanding portfolio) or depth (the socioeconomic level of clients that MFIs reach). In addition, according to Rhyne, (2008), the two most usual aspects of outreach of reaching out to the poor in the literature are its depth and breadth. Depth of outreach refers to the poverty level of clients served, whereas breadth of outreach refers to the scale of operations of an MFI. The concept of depth and width of outreach is still widely used in microfinance literature as a measure of performance of the institutions in terms of outreach.

However, Schreiner, (2001) cited that outreach is measured in terms of depth, worth to users, cost to users, width, length, and scope. The author proposes this six dimension approach of outreach measures in attempt to fit the outreach vs. sustainability debate within the traditional economic cost- benefit framework. The author further argues that the six dimensions are the components of the social value that is supposed to be created by MFIs. 

Schreiner (2001) noted that the average loan size broken down by size dimensions. Average loan size by itself is a blunt and possibly inaccurate measure of depth. A more useful way to use average loan size is to break it down into its seven distinct dimensions, each of which, as Schreiner demonstrates, can be measured: dollars disbursed, average balance, term to maturity, dollars per installment, time between installments, number of installments, and dollar years of borrowed resources. Smaller values along each dimension generally mean smaller loans and poorer borrowers.

Schreiner (2001) argued that financial self-sufficiency or some other indicator of financial performance, such as return on equity, profit margin, or return on assets, in addition to indicators that suggest institutional sustainability, such as operational self-sufficiency, number of years of operation, average yearly change in equity (regardless of source), average yearly cash flow, portfolio-at-risk, loan write-offs, or customer satisfaction indices. Additional indicators explicitly recognize that financial self-sufficiency is neither necessary nor sufficient for institutional sustainability, and they give other relevant factors weight in assessing length of outreach. Schreiner (2001) mentioned worth to users as a form of outreach where the clients’ willingness to pay which can be measured by dropout rate. Repeated purchases are the best and straightforward way of measuring worth.

2.3 Relationship between social mission and outreach maximization

In recent years, there has been significant discussion concerning the introduction of social performance criteria for measuring MFI performance since traditionally the success of MFIs has often been measured using only financial measurements. The additional criteria have encouraged MFIs to improve their understanding of the simultaneous pursuit of financial and social performance, a “double bottom line”, in tradeoffs between economic and social return on investment (Zeller, Lapenu, & Greeley, 2003). The social performance of MFIs measures the level of their dedication to fulfilling their social mission (Bédécarrats, Baur, & Lapenu, 2011). This mission is determined by the basic client problem that an unstable family income results in a lack of household security. Thus, these social performance measures are important means for determining the amount of work done by the MFI and where MFI has invested its money to accept visibility from the society.

Outreach is one of the important objectives in the critical triangle that MFIs need to reach. Currently available measurements of MFIs indicate an overriding concern with the profitability of MFI activities and less with social performance. Out-reach, however, is a multifaceted concept that must be measured according to various dimensions (Meyer, 2002; Navajas, Schreiner, Meyer, Gonzalez-vega, & Rodriguezmeza, 2000). Navajas et al. (2000, p. 335) highlighted six aspects for measuring MFI outreach, stating that “outreach is the social value of the output of a microfinance organisation in terms of depth, worth to users, cost to users, breadth, length, and scope.”

In simple terms, most scholars describe out-reach as the number of borrowers or clients served by MFIs (Bassem, 2009; Cull, Demirgüç-Kunt, & Morduch, 2007; Hartarska, 2005, 2009; Hartarska & Mersland, 2009; Hartarska & Nadolnyak, 2007; Kereta, 2007; Mersland & Strøm, 2009; Meyer, 2002; Navajas et al., 2000; Tchakoute-Tchuigoua, 2010). This means that those who had no previous access to formal financial services are now served by an MFI. These people are the poor who lack the collateral to obtain loans from the formal financial sector. Kyereboah-Coleman and Osei (2008) used the annual rate of change of active clients to evaluate outreach instead of the number of clients. Com-pared with men, women face greater problems in accessing loans. Scholars therefore measured the number of women served by finding out whether MFIs consciously target female clients in processing loan applications (Mersland, Randøy, & Strøm, 2011). 

The poorest of the poor usually encounter many difficulties in gaining access to credit from formal financial institutions as they are unable to prove their repayment ability due to a lack of col-lateral. It is essential to identify poor clients. Hartarska (2005) and Bassem (2009) employed “depth of outreach” as one criterion in their study to measure the outreach of microfinance activities. The term refers to “the value the society attaches to the net gain from the use of micro credit by a given borrower” (Navajas et al., 2000, p. 335). Even though it is difficult to measure the depth of outreach, it is important to know how well MFIs reach the very poor. Further-more, they highlighted the criteria of worth to users and cost to users as two additional important as-pects of outreach. These refer to how much the bor-rower is willing to pay for the loan and the cost of the loan to a borrower respectively. Normally, the cost of a loan consists of interest rates and various other loan-related transaction costs that they have to pay the lender.

Bereket and Lalitha (2009) examined a tradeoff between outreach to the poor and financial sustainability based on data on 85 Indian MFIs using correlation matrix. In this regard, the finding of this study does not support a tradeoff between outreach and financial sustainability more specifically the simple correlation between average loan size (proxy to depth of outreach) and operational sustainability is found to be weak. Furthermore, the correlation between number of women borrowers (alternative proxy to outreach) and operational sustainability is also very weak. 

However, the study revealed that there is a strong positive correlation between the number of active borrowers (breadth of outreach) and operational sustainability. Further, the data revealed that that the majority of the clients of these MFIs bout 93 percent are women and indicates that Indian MFIs have good depth of outreach. It is interesting to know that about 82% MFIs they have already reached operational sustainability however, it should be noted that operational sustainability is less rigorous measures of sustainability. In this regard their findings do not support the tradeoff between outreach and financial sustainability more specifically, the correlation between average loan size (proxy to outreach) and operational sustainability is weak. The simple correlation between average loan size and number of women borrowers has shown strong negative correlation which may indicate that women are borrowing small loans. Therefore, it can be concluded that the overall result of the study did not find a tradeoff between outreach the poor and operational sustainability.

Cull et al. (2007) attempts to systematically examine financial performance and outreach in a large comparative study based on a data set of 124 microfinance institutions in 49 countries. Cull et al. empirically investigate whether there is a trade-off between the depth of outreach and profitability of MFIs. Cull et al. (2006) used three dependent variables: FSS, unadjusted measure of OSS and ROA. The results show that MFIs that mainly provide individual loans perform better in terms of profitability, but the fraction of poor borrowers and female borrowers in the loan portfolio is lower than for institutions that mainly provide group loans. The study also suggests that individual-based MFIs increasingly focus on wealthier clients – a process termed as mission drift – whereas this is less so for the group-based MFIs. Thus, the study by Cull et al. provides evidence for a trade-off between sustainability and outreach and stresses the importance of institutional design in determining the existence and size of such a trade-off. Moreover, Cull et al. (2006) found that institutions that make smaller loans are not necessarily less profitable. Larger loan sizes are associated with lower average costs for both individual-based lenders and solidarity group lenders.

Hermes et al. (2010) provide new evidence on the existence of the trade-off between sustainability and outreach, using data for 435 MFI for the period 1997-2007. In particular, the study focuses on the relationship between cost efficiency of MFIs (as a measure of sustainability) and the depth of outreach measured by the average loan balance, average saving balance and percentage of women borrowers. Cost efficiency of an MFI is measured by using a stochastic frontier analysis. This approach measures cost efficiency in terms of how close the actual costs of the lending activities of an MFI are to what the costs of a best-practice MFI would have been in case it produces identical output under the same conditions. They find strong evidence that outreach is negatively related to efficiency of MFIs. More specifically, MFIs that have lower average loan balances are also clearly less efficient. Moreover, MFIs that have more women borrowers as clients are also less efficient. The results remain robustly significant even after taking into account a long list of control variables.

Locally, Kioko (2012) undertook a study investigating factors influencing social mission of Micro Finance Institution’s in Kenya. The study was a descriptive survey targeting a population of 33 MFI’s operating in Nairobi governed by the Micro finance Act of 2006. The study found out that MFIs sustainability have been influenced by differentiated services, slacken the requisite for collaterals and beef up of the legal procedures and use financial indicators/ratios like leverage ratios, analysis of arrears rate, analyzing the delinquency of borrowers to mention just a few, to assess, monitor and evaluate market share, credit defaults, non-performing loans and customer loyalty.

Kimando, Kihoro, Njogu, & Wachera (2012) sought to establish the factors affecting social mission of microfinance institutions operating within the Murang’a Municipality. The study found that financial regulations, number of clients served, financial coverage and volume of credit transacted were the factors that highly affected the sustainability of microfinance institutions. The study concludes that sustainability of MFIs is a function of related and interconnected factors. The study recommends MFIs to open many branches to reach as many people as possible and ensure they conform to rules and regulations.

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter discusses the research design, data type and sources, sample size and selection, data collection tools/methods, data presentation and analysis, data collection procedure and limitation of the study.

3.2 Research Design

A descriptive research design was used because it was flexible in both quantitative and qualitative data collection. Descriptive research design was used because it was effective to analyze non-quantified topics and issues, the possibility to observe the phenomenon in a completely natural and unchanged natural environment and the opportunity to integrate the qualitative and quantitative methods of data collection which other designs do not provide.

3.3 Data type and sources

Data was collected from both primary and secondary source.

Primary data was collected by use of questionnaires and interview guide. Secondary data was collected from published journals, reports, text books, and company records.

3.4 Study Population

The target population of the study was the senior management, human resource officers, research and development, banking officers, credit officers and customer care attendants.

3.5 Sample Size and Composition 

The researcher used a sample size of 83 respondents out of 86 and these were categorized in the following manner, 2 from the senior management level, 6 from the human resource department.8 customer care attendants, 12 banking officers, 28 credit officers and 10 research and development officers. This number was determined using Krejcie, R.V & Morgan, D.W (1970).

Table 3:1 showing the sample size of respondents

Source: Krejcie & Morgan (1970)

3.6 Sampling Technique

The researcher used a purposive sampling technique where managers, credit officers in order to get reliable and consistent information in a broad perspective and group using a simple random technique.

3.7 Data Collection Tools and Methods

This section revealed the nature of data collection tools and methods as explained below:

3.7.1 Questionnaire

The researcher developed both open and closed ended question which was approved fast by the super visor before they are presented to the respondents to be answered. The questionnaire was used because large amounts of information can be collected from a large number of people in a short period of time and in a relatively cost effective way, can be carried out by the researcher or by any number of people with limited affect to its validity and reliability, the results of the questionnaires can usually be quickly and easily quantified by either a researcher or through the use of a software package, can be analysed more ‘scientifically’ and objectively, when data has been quantified, it can be used to compare and contrast other research and may be used to measure change.

3.7.2 Interview Guide

Face to face in depth interviews was conducted to collect data from opportunity bank officials and other respondents. Structured questions and open ended statements was used by the researcher in trying to interview senior managers, employees from the loans department, employees from accounts section, credit department under opportunity bank Kampala.

3.8 Data Collection Procedure

A letter of introduction was obtained from the research coordinator, Economics and Statistics, Kyambogo University seeking permission to conduct the study. It was presented to the officials of opportunity ban seeking permission to carrying out the study in the division. After being granted the permission, the researcher proceeded to make appointments with the selected respondents. Thereafter, the researcher will administer questionnaires and the required data was collected. The researcher personally will administer questionnaires to the respondents in order to avoid delay, to avoid collecting wrong data, ensure completeness and accuracy and confidentiality of the data collected was strictly adhered to.

3.9 Data Processing and Analysis

Completed questionnaire was edited for completeness and consistency. The questionnaire was coded to allow for statistical analysis. According to Mugenda (2010), data must be cleaned, coded and properly analyzed in order to obtain a meaningful report. Ms-excel was used to analyze and interpret the collected data where appropriate. The percentage and frequencies were posted to excel worksheets to generate graphical summaries that also used to indicate the direction of respondents, tables and charts was used to summarize responses for further analysis and facilitate comparison.

3.10 Reliability and Validity of Research Instruments

The questionnaire was well structured to achieve the purpos