EFFECTS OF HIGH INTEREST CHARGES ON THE GROWTH OF BUSINESSE IN KAMPALA

CASE STUDY:   ST BALIKUDEMBE MARKET

INTRODUCTION

This chapter covers the background of the study, Statement of the problem, purpose of the study, research questions, and scope of the study, significance of the study and definition of terms.

1.1       Background to the Study

The history of  interest  can be documented at least several thousand years back; forms of lending were evident in ancient Greek and Roman times, and monetary loans were even mentioned in the Christian bible, (Shafiel et al, 2010). In the ancient (14 century), Italian moneylenders would set up benches in the local marketplace, with the word for bench being “banca”, from which we eventually derived the word “bank”. The moneylenders would charge interest on their loans at a rate that they set, and would sometimes be quite successful and become very wealthy, (Kovacevic, 2009). One of the early forms of lending that should be explored in the history of loans is the indentured loan (also known as indentured servitude.) Initially practiced in the Middle Ages and through the 19th century by land owners and the wealthy, indentured servitude allowed poor individuals to borrow the money needed for major expenses such as travel and real estate, then the borrowers would pay back with an interest, (Boca Raton, 2009). The modern history of loan management started much later than these ancient times, it is, however, important to realize that lending started much earlier than many people would imagine and has its origin in much older times

Globally high interest charges is a is a global issue that is given much concern and most financial institution in the world maintain their liquidity through charging interest in the loans, (Guttentag , 2007). High interest charges has been the biggest challenge for financial institutions globally the world leading financial institutions of Barclays bank, HSBC bank, CITI bank lose billions of dollars as a result of high interest charges, according to the world bank most leading financial institutions lose billions of dollars as a result of poor loan management, during the world recession of 2008 most leading financial institutions were blamed for the poor loan management  which led to the global recession of 2008, (world bank report, 2008). In finance, a loan is a debt provided by one entity (organization or individual) to another entity at an interest charge, and evidenced by a note which specifies, among other things, the principal amount, interest charge, and date of repayment. A loan entails the reallocation of the subject asset(s) for a period of time, between the lender and the borrower, (Guttentag, 2007). Loan management  is a risky enterprise because repayment of loans can seldom be fully guaranteed, it involves implicit contracts between lenders and borrowers, thus, a well management loan can lead to better performance of microfinance institution, (Falk et al, 2004), Loan management is a system which is very essential for lending institutions to stay in business and as such an institution with poor loan management ability is at risk of collapse, (Fehr et al, 2005). A loan can be defined as an arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with an interest charge, at some future point(s) in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan though modern capital markets have developed many ways of managing this risk, (Zehnder et al, 2005). They posit that in credit markets dominated by short-term interactions, borrowers may only be motivated to repay if they know that, due to credit reporting, their current behavior is observable by other lenders and most of all the impact of credit reporting on repayment behavior and credit market performance is highly dependent on the potential loan management, (Zehnderm et al, 2005). Microfinance refers to an array of financial services, including loans, savings and insurance, available to poor entrepreneurs and small business owners who have no collateral and wouldn’t otherwise qualify for a standard bank loan. Most often, microloans are given to those living in still-developing countries who are working in a variety of different trades, including carpentry, fishing, market vending and transportation (orebiyi 2002).Microloans typically are not more than several hundred dollars. Examples of uses include money for tools to start work in construction, or makeup and other supplies needed to become a cosmetologist. Because they are the ones that commonly use their profits to provide for their families with things like food, clothing, shelter and education, women currently comprise roughly two-thirds of all microfinance clients. The goal of micro financing is to provide individuals with money to invest in themselves or their business to help get them out of poverty. When providing loans, micro financing institutions do not require collateral, but do insist that the loan is repaid within six months to a year plus an interest charge (enslow 2003).

As borrowers with a good track record receive better credit offers, all borrowers have a strong incentive to sustain their reputation by repaying their debt (Orebiyi, 2002). Therefore, by repeatedly interacting with the same borrower, lenders establish long-term relationships that enable them to condition their credit terms on the past repayments of their borrower. As only a good reputation leads to attractive credit offers from the incumbent lender, borrowers have strong incentives to repay.

Credit is very essential for the business to grow and be able to pay workers and cater personal needs of for the entrepreneur.   And for the business to grow it must have enough credit. St Balikudembe market is located Kampala capital city central district, it’s concentrated with many small and medium enterprises that deal in a variety of goods and services like restaurant, market venders, retail shops tailoring carpentry sell of secondhand clothes among others. Most of these businesses receive credit from financial institutions but due to high interest charges, they normally fail to pay back and collapse within less than five years from the date of their birth. Therefore, this study intends to investigate into the effects of interest charges on the growth of businesses in Kampala.

1.2       Statement of the Problem

Mcloughlin (2013) states that for some time, policymakers have been concerned about the effects of the seemingly high interest charges typically charged by microfinance institutions (MFI) lending money to businesses owned by poor people.

Credit is very essential for a business to grow and pay workers among many others, however many businesses have failed in their infant stages at Sentibalikudembe market without reaching their 6th despite the availability of credit services availed by micro finance institutions and money lenders who operate in Kampala. This has puzzled management of sentibalikudembe market as to what could be the cause. Therefore this study intends to investigate the effect of credit charges on the growth of business enterprises in Kampala.

1.3       Purpose of the Study

The study seeks to investigate the effects of credit charges on the growth of businesses in Sentibalikudembe market in Kampala

1.4       Objectives of the Study

1. To determine the challenges of credit management on the growth of businesses in Kampala.
2. To investigate ways of proper credit management that promote growth of business enterprises in Kampala.

• To establish the different ways of improving the growth of businesses in Kampala

1.5       Research Questions

1. What are the challenges of credit management on the growth of businesses in Kampala?
2. What are the ways of proper credit management that can promote growth of business enterprises in Kampala?
3. What are the different ways of improving the performance of business enterprises in Kampala?

1.6       Scope of the Study

1.6.1       Study Scope

The study will specifically look at the challenges of credit management on on the growth of businesses, ways of proper credit management that can promote growth of business enterprises and, different ways of improving the credit performance of that can promote growth of business enterprises.

1.6.2 Geographical Scope

The study will be carried out at sentibalikudembe market.

1.6.3 Time scope

The period of data to be considered in the organization will be from 2012-2015 and period of body of knowledge in reviewing literature will be from 2000-2015.

1.7       Significance of the Study

The study is expected to provide guidance to the Central Bank and other regulators in the credit risk management policy formulation.

The study will add to the already existing literature on factors that determine the Growth of business enterprises in Kampala

The study is expected to stimulate further research into the area of lending policy formulation and challenges of credit management.

The study is expected to enable commercial banks identify the credit management policies that are critical in ensuring the growth of businesses in Kampala.

The study will help the government in formulation of policies regarding credit institutions in the country.

CHAPTER TWO

LITERATURE REVIEW

2.1  INTRODUCTION

This chapter discusses what various scholars have written about , impact of credit on small and medium enterprises, challenges of credit management on performance of small and medium enterprises, ways of proper credit management on the development of small and medium enterprises, different ways of improving the performance of small and medium enterprises

Conceptual over view of credit

Conceptual review of small and medium enterprises

The term SME covers a wide range of definitions and measures, varying from country to country and between the sources reporting SME statistics. Some of the commonly used criteria are the number of employees, total net assets, sales and investment level. However, the most common definitional basis used is employment, and here again, there is variation in defining the upper and lower size limit of an SME. Despite this variance, a large number of sources define an SME to have a cut-off range of 0-250 employees

2.2 CHALLENGES OF CREDIT MANAGEMENT ON THE GROWTH OF BUSINESSES

Different scholars have written about challenges of cash management and they include;

Poor personal financial management, Burki and Perry, (2006) [10] assert that the bank owners are directly or indirectly involved in the weakening of the loan assessment systems in that they often turn banks’ credits to finance their own activities which they in most cases did not pay in time and thus affecting bank operations. However they did not explain the procedure that can be undertaken to avoid such loopholes

Difficulty in determining credit worthiness, , financial institutions have failed to determine credit worth borrowers simply because they have inadequate credit policies, failure of bank officers to comply with lending policies, inadequate customer relations, low staff morale, and bank officers’ exposure to fraud. Nguyen (2007)  on the other hand believes that, the inefficient mechanisms used in assessing loans are attributed by the banks’ pessimism about the ability of technology to come up with decisions on who qualifies and who doesn’t. He went ahead to suggest that the failures need to be closely examined because they reveal deep-rooted weaknesses and limitations about banks.

Presence of low income earners in an economy, low-income consumers are high-risk borrowers as this is attributed to inadequate income and lack of income security and hence making it difficult for them to make repayments on credit commitments. He further adds that this is compounded by the disproportionately higher cost of credit available to low income earners and lack of flexibility available to consumers who may experience temporary difficulty in maintaining repayments. However, he did not explain the extent of the relationship between poor loan assessment and low-income consumers, (Hahn, 2002).

Competition among financial institutions, found that overwhelming banks competition in prices (interest rates) and moreover with imperfect knowledge of borrowers’ ability to repay their debts has accelerated poor loan assessments to potential borrowers (Bofondi et al, 2003). Considering Uganda’s banking sector, Interest rate spreads have been exceptionally high, reflecting high levels of perceived credit risk, low competition among banks, and inefficiency of the system. Interest rate spreads have ranged between 15 -20 percent since 1994, while real lending rates have varied from 10-25 percent since 1996. Non-interest expense is high at 5.8 percent of assets and is passed on to borrowers in the form of high spreads, suggesting inadequate competitive pressure in the market. However, there are signs of more competitive forces at play following the privatization of UCBL and its subsequent merger with Stanbic, International Monetary Fund, (2003).

High level of risks involved in holding and lending credit, lending embraces a wide range of risks. In an economy where survival almost depends on loans, loan officers have to be careful while assessing borrowers. Where interest rate is considered as an important factor, a lending officer should not use a single rate of interest for all loans because it would lead to inappropriate investment decisions. Other things being constant, a loan should be required to earn a rate that is at least equal to the risk free rate plus a premium. The premium would compensate for the risk attached to the loan. Nguyen (2007) considers a model of repeated moral hazard, without learning and risk neutrality. In the optimal loan contract, the loan interest rate and collateral requirements decrease with the duration of the bank-borrower relationship, after the firm has demonstrated some project success. In a recent contribution, Freixas (2005) presents a model where relationships arise because there is an initial fixed cost of monitoring, that is, repeated lending from the same bank avoids duplication of monitoring costs

Government policies. According to Krugman, (2003), the reasons as to why there was no proper credit assessment in Asian banks, was partly due to government persuasiveness or order to lend heavily to particular industries and companies. In other wards they were”captive banks”. This allowed the companies concerned to become over leveraged (vulnerable to economic down town) and directed resources into un profitable investments hence affecting the bank’s performance. Burki et al, (2003) on the other hand have a different view. They believe that, poor loan assessment in Asian Banks was as a result of lack of transparency in regional banking systems, which resulted into failure in disclosing the true scale of bad debt problems and henceforth weakening the market discipline on bank management. This reduced the need for them to face the problems and hence undermining public confidence in banking systems, which was largely attributed to lack of credible information from depositors.

Macroeconomics imbalance, Saudi Arabian monetary agency, (2003) [31] argues that the main causes of the problems faced by Saudi banks arises from the macroeconomics imbalances which are mainly created by lacked adequate credit assessment and monitoring procedures in relation to lack of required technical expertise and that all this therefore made banks so difficult to recover their cash from the borrowers. However no remedies were advanced to counteract the situation of poor credit assessment in banks.

Low level of deposits in banks, many deposits, According to the International Monetary Fund, (2003) a key feature of the Ugandan banking sector is the high degree of concentration on both the loan and deposit sides. When loans to the top five borrowers for each bank are aggregated, they represent about 40 percent of all loans with deposit concentration having a smaller percentage. Banking sector’s exposure to a small number of borrowers and depositors means that a cyclical downtown or terms of trade shock affecting these borrowers could translate quickly into asset quality problems for banks. I agree with IMF simply because a loan is a major asset of a financial institution so if it is not properly managed, there are few chances of survival..

Limited collateral security among lenders, People living in poverty, like in Ethiopia, need a wide range of financial services for consumption smoothing, running their business and building assets. But due to collateral problems, poor people in most cases have no credit access from Banks. Microfinance offers financial services such as loans, savings and micro insurance to the poor people either in individual or in a group basis. Lending to the poor usually means that a lender will not be able to get any collateral to secure the loan (Njoroge, et al, 2009). Moreover, Kimentyi et al. (1998) argues that the most difficult aspects of lending to poor clients are borrower selection and repayment enforcement.

High level of risk in lending, Dejene, (2003) argues in his study on the economic importance of the informal institutions in Ethiopia that the poor are often marginalized in the formal credit markets. This can be explained partly in terms of: 1) a lack of collateral, which makes lending to the poor a risky venture; 2) transaction cost of lending to and borrowing by the poor is often high; and 3) utility loss from repayment is higher for the poor as compared to the rich. So the poor don’t have access to the formal financial sources. Lack of access to institutional credit is one of the crucial factors impeding the poor from involving in operating small business and in particular and economic development in general.

Limited number of customers especially in the developing world, The establishment of sustainable microfinance institutions that reach a large number of rural and urban poor, who are not served by the conventional financial institutions (such as the Commercial Banks) has been a prime component of the new development strategy of most African countries, Although the development of microfinance institutions in the developing world especially in African countries,  started very recently, the industry has shown a remarkable growth in terms of outreach, particularly in number of clients (Amha, 2000).

Poor infrastructural development in most parts of the developing world has also hampered the work of most financial institutions , this has mainly been in terms of lack of proper ways of communication were financial institutions have faced a big set back in terms of delivering information to their debtors. Despite this financial institutions also faced challenges of, weak legal systems, banking sector and lack of technical capacity (CGAP, 2010).

The existence of non performing loans, some of the loans given out by the lending institutions unfortunately become non performing and eventually result in bad debts with adverse consequences for the overall financial performance of the institutions. The issue of loan default is becoming an increasing problem that threatens the sustainability of MFIs. The causes of the problem are multi-dimensional and non uniform among different literatures, (

An informational constraint, the fundamental feature that creates imperfection in credit markets is informational constraints. Ray (2008) stated that informational gap occur at two basic levels. First, there is lack of information regarding the use to which a loan will be put. Second, there is lack of information regarding the repayment decision of borrowers, as well as limited knowledge of the defaulter’s subsequent needs and activities. All the important features of credit markets can be understood as responses to one or the other of these informational problems. In addition, Behrman and Srinivasan (2005) stated about the arising of agency problem in the functioning of credit market. This problem exists when there are different goals between creditors, shareholders and management. Financial intermediaries may reduce agency problem by monitoring borrowers and make wise investment choices

Limited trust, Sinapi Aba Trust is one of the leading microfinance institutions facing the challenge of a growing non- performing loan portfolio with its attendant harmful effect on the operations of the institution and the situation calls for remedial measures to curb it. The study therefore focuses on identifying the causes of non performing loans, the implications of NPLs on the operations of MFIs and the strategies to reduce the incidence of NPLs.

Speculation inn the financial market is one of the principle challenges of loan, management as , another publication (kalyan-city.blogspot.com) identifies speculation: i.e. investing in high risk assets to earn high income and also fraudulent practices such advancing loans to ineligible persons or advances without security or reference as some of the causes of failures in loan management. It also cites internal reasons such as labor agitation/shortage and market failure as some of the causes of the incidence of NPLs. External factors such as recession in the economy and natural calamities/disasters were also cited by the same publication as some of the factors accounting for loan default. (Barth et al., 2004).

Principal repayment in future (Kay Associate Ltd), 2005). Because of this risk of default in loan repayment, lenders needs to project into the future and make sound judgment that will ensure that repayment is effected at the agreed date. Available literature places so much importance on the lender‟s role in ensuring good decisions relating to the granting of loans in order to minimize credit risk. The lender must always aim at assessing the extent of the risk associated with the lending and try to reduce factors that can undermine repayment. The lender should therefore assemble all the relevant information that will assist him/her in arriving at a sound credit decision. In view of the possibility of nonpayment which leads to NPLs, MFIs have adopted a standard loan request procedures and requirements usually contained in credit policy manual to guide loan officers and customers. Some of the factors that the MFIs consider before granting loans include the following which are often referred to as the canons of good lending:

2.3 DIFFERENT WAYS OF PROPER CREDIT MANAGEMENT THAT AFFECT BUSINESS ENTERPRISES

The following are the different Ways of managing organizational liquidity according to different scholars;

Balancing risks and rewards is essential if an organization is to maintain adequate liquidity, According to Fedorowioz, (2003) Banks and other lending institutions must constantly balance risks and rewards. Too high a price on loan products, you lose the customer, too low, you starve the profit margin or take a loss, too much capital on reserve, you miss investment revenue too little, and you risk regulatory noncompliance and financial instability. When every department, line of business and region measures and reports risks differently with desperate risk management systems, it can be difficult to accurately gauge overall risk exposure and strike the right balance.

Analyzing the credit risk of clients before advancing cash to them, financial ratios cannot be analyzed in isolation because there are no reliable standards to determine what their values should be. The client’s ratios must be compared with those of peer firms in the industry. However, cross sectional analysis cannot be adequately performed unless the banks have sufficient data regarding the ratios of peer firms, which operate in the same industry. Though other countries like Malta there is a lack of statistical data and doubtlessly this makes it very difficult to build a database, which would help the lending officers to interpretthe ratiosits is still imperative for financial institution analyze the credit of their clients in order to avoid being insolvent , (McCarthy, 2002).

Proper management of credit by banks, Burki and Perry (1998) [10] argue that, there is a need to establish strict internal guidelines, which ensures that loans are based on sound credit analysis if the banks are to realize significant profitability. However, they did not specify the mechanisms that can be employed. In their analysis is of loans lending, they further argue that banks should not be allowed to engage in activities which regulators can not be certain that they can monitor other wise, it leads to losses to the bank. This is significant in that it reduces on unnecessary banks bad debts.

Assessing clients before giving them loans, According to Alec and Annan (2004) [5] Using SAS loan assessment based models as an analysis tool, managers are able to identify changes quickly within a portfolio and through the automated process, modify the assessment strategy for certain products in a matter of hours. In the event of customers failing to uphold their commitment, loan assessment information with in models developed is then analyzed and evaluated by the decision maker to manage customers consistently and appropriately. Some of these models include:

Employing experienced staff in an organization with professional training in finance, when an organizations has highly qualified and experienced staff who can provide adequate knowledge to organization cash management becomes easy and organizational liquidity is maintained so that organization is able to competitive in the global market. (erridge, 2003).

2.4 WAYS OF IMPROVING THE PERFORMANCE OF BUSINESS ENTERPRISES

Capacity Building, The growing competition, poaching of staff and lack of training and increasing demand for higher pay levels make human resources one of the most intractable problems in the sector. Capacity building in the form of a skilled and professional human capital base and adequate access to funding is essential for the building of a sustainable and efficient microfinance sector. Vento (2004)

Improvement of infrastructure, Inadequate and expensive Infrastructure base, Inadequate and expensive infrastructure such as communication, information technology, roads and electricity results in high operational cost within the microfinance sector. The current limited supply of these resources limits operations and drives up cost. In respect of infrastructure development, there is the need to establish a solid base and provide adequate logistics such as telecommunications and information technology to support the operations of microfinance institutions to make them more efficient Murray and Boros (2002)

Improving on the level of funding, The key challenges confronting the microfinance institutions in developing countries such as Ghana include Inadequate funding for capacity building, inadequate and expensive infrastructure base, Inadequate credit delivery and management, the inability to target the vulnerable and the marginalized, information gathering and dissemination, regulation and supervision, consumer protection and research, monitoring and evaluation. Norell, (2001)

Developing cheap ways of gathering information, Armendariz et al, (2010) stated that the information asymmetry problems could potentially be eliminated if lenders had cheap ways to gather and evaluate information on their clients and to enforce contracts. However, lenders typically face relatively high transactions costs when working in poor communities since handling many small transactions is far more expensive than servicing one large transaction for a richer borrower. Another potential solution would be available if borrowers had marketable assets to offer as collateral. In this sense, any problem on the loan was covered by the borrower’s asset. Thus, the lender could lend without risk. But the starting point for microfinance is that new ways of delivering loans are needed precisely because borrowers are too poor to have much in the way of marketable assets. However, Behrman and Srinivasan (1995) stated that one way for the government to improve enforcement conditions for credit markets is to improve the possibilities for usable sources of collateral like implementation of land registration.

Improvement in credit management systems, Inadequate Credit delivery and management, the mechanism for credit delivery within the microfinance sector is inadequate and the microfinance institutions do not have the expertise to categorize their client into the various poverty categories so as to meet their specific needs. (NBE, 2010).

Regulation and Supervision Microfinance institutions in the formal sector operates within a rigid regulatory and supervisory environment which presents some challenges for innovation, outreach and overall performance of the institutions. There is also an absence of specific BoG regulatory guidelines for the apex bodies in the semi-formal and informal sectors for the supervision of their members, (Najoragan, 2000).

Better information gathering and Dissemination, Lack of adequate and reliable information remains a challenge to the microfinance industry. These problems adversely affect the ability to properly target the right clients in order to meet the specific needs of such clients. There is also a paucity of information on microfinance institutions and their operations. (MFRC, 2002)

Creation of better ways of generation of information from lenders, Karlan and Zinman (2006) stated that better understandings of information asymmetries are critical for both lenders and policymakers. For instance, adverse selection problems should motivate policymakers and lenders to consider subsidies, loan guarantees, information coordination, and enhanced screening strategies. On the other hand, moral hazard problems should also motivate policymakers and lenders to consider legal reforms in the areas of liability and enhanced dynamic contracting schemes.

2.5 Conclusion

The chapter reveals the views of scholars on the subject of impact of credit on small and medium enterprises.

The literature shows the knowledge on challenges of loan management where it highlights factors like poor personal financial management, difficulty in determining credit worthiness, presence of low income earners and competition among financial institutions as some of the challenges of credit management it also highlights a number of factors on different ways of proper credit management, and the ways of improving on the performance of small and medium enterprises, however the literature does not address the specifics of Nakawa market , there by presenting a knowledge gap to be filled by this study.

CHAPTER THREE

METHODOLOGY

3.0       INTRODUCTION

This chapter presents the methodology which consists of the research design, area of study, study population, sample population and selection, sampling technique, data collection method, data quality control, data collection procedures and limitations of the study.

3.1 Research design

Qualitative and quantitative research designs will be used. the researcher will use the above methods because many aspects will be covered in the study concerning investigate the effects of credit charges on the growth of businesses in Sentibalikudembe market in Kampala given the complex nature of the market, qualitative research method will be used because it collects information within a short time while quantitative will be through interview to cross check what has been given.

3.2       Area of the study

The study will be carried out at Sentibalikudembe

3.3       Study population and sample size

The study will target business men, market administrators, Market Venders.

3.4       Sampling techniques

According to (Amin, 2005) sampling involves selecting a sample of the population in such a way that samples of the same size have equal chances of being selected.

The sample will target 36 respondents that will be selected in a way that 16 respondents’ will be business men, 5 will be key administrators, 15 respondents who are market vendors. While carrying out research, purposive sampling will be applied to the above different categories of respondents.

Using Krejcie and Morgan’s (1970) table for sample size determination approach, a sample size of 36 employees will be selected from the total population of 40 business men and women.

Table 1 below shows the summary of the sample size of the respondents and the sampling techniques that will be used in the study

Table: Sample size of the respondents

3.5 Data collection methods

Source of data will be from both primary and secondary sources.

• Primary data

Primary data will be obtained from the questionnaires administered on the target respondents to gain opinions and practices on the effects of credit charges on the growth of businesses in Sentibalikudembe market in Kampala.

• Secondary sources

Secondary data is data which has been collected by individuals or agencies for purposes other than those of a particular research study. It is data developed for some purpose other than for helping to solve the research problem at hand (Bell, 1997). This will comprise of literature related to the effects of credit charges on the growth of businesses in relation to the case study. Secondary data will be sourced because it yields more accurate information than obtained through primary data, and it is also cheaper.

3.6 Data Collection Instruments

The major instruments for data collection will be questionnaires and interview guide. Surveys will be just one part of a complete data collection and evaluation strategy. The major method of data collection for the study will be the survey, which will be done using selected instruments like questionnaires. The questionnaire will provide respondents with ample time to comprehend the questions raised and hence, they will be able to answer factually.

3.6.1 Questionnaires

The questionnaire will be used to collect quantitative data. The researcher will administer the questionnaires to respondents in different respondents including, administrators, business men, and market vendors which will be designed basing on study objectives and questions. Respondents will read and write the questionnaires themselves. The questionnaires will be close ended and will be considered convenient because they will be administered to the literate and its anonymous nature will fetch unhindered responses.

3.6.2 Interviews

Qualitative data will be collected from the informants using interviews. The interview guide will be structured. The interviews will be held with administrators and business men, and will take approximately thirty to sixty minutes. This will be used since it’s the best tool for getting first-hand information /views, perceptions, feelings and attitudes of respondents. Both formal and informal interviews will be used to get maximum information from the different respondents to participate in the research.

3.7 Data collection procedures

Upon receiving the University permission to carry out research, the area of study will be visited for purposes of familiarization.  The researcher will seek permission from administrators and once allowed to proceed with research, questionnaires will be issued and interviews will be carried out with the selected respondents.

3.8 Quality control of data instruments

The instrument will be taken to the supervisor to check its correctness there after pilot study will be carried out to find out if it measures what it is meant to for.

3.9 Data processing and analysis

The raw data will be coded, edited, and arranged ready for analyzing only completed raw data will be analyzed using statistical tables and graphs.

3.10 Limitations of the study

Financial constraint, cash flow may not flow as   expected but this will not affect the study. Respondents may delay in filling the questionnaire and fear to give information, but they will be persuaded that the information will be kept secret.

REFERENCES

Alwisniwiski, H, (1995), Challenges of Micro savings. Deutsche Gessellch Mobilization concepts and views from the Fur field, Internet.

Bagonza G, (2001), Have the banks Mobilization Strategies led to disintermediation of savings, The Uganda Bankers Vol. 9 No. 1. Uganda Institute of Bankers.

Finscope Uganda, (2009), Results of a National Survey On Demand, usage and Access To Financial Services In Uganda,  Final report. The Uganda Institute of Bankers Library.

Graham Wright, (1999), The case for voluntary, open access savings facilities and why Bangladesh’s largest MFIs were slow to react, Uganda Institute of Bankers Library, 332.0415 WRI.

Kasekende L, (1998), Savings in the context of Macro Economic Policy Issues. The East Africa Experience. www.gtz.de/dokumente/bib/98-1494

Levine Ross, (2005), Finance and Growth: Theory and Evidence, in Philppe Aghion and Steven Durlayf, eds. Handbook of Economic Growth. The Netherlands: Elsevier Science, Uganda Institute of Banker Library.

Marguerite Robinson, (2011), Savings Mobilization  as a Financial Instrument and its Relevance for the poor. http://www.worldbank.org/financial/assets/images/mtp

Matovu J.M, (2010), Domestic Resource Mobilization in Sub–Saharan Africa, the case of Uganda. www.dfid.gov.uk/R4D/PDF

Mpuga P, (1999), Savings Mobilization in Uganda, Journal of Capital Markets Authority Vol. 3. No. 1