AN INVESTIGATION INTO THE EFFECTS OF DONORS AID ON MICROFINANCE INSTITUTIONS SUSTAINABILITY A CASE STUDY RURAL FINANCE INITIATIVE IN MUNUKI PAYAM JUBA COUNTY.

ABSTRACT

The topic of study was an investigation into the effects of donors aid on microfinance institutions sustainability a case study rural finance initiative in munuki payam juba county, the study was guided by the following objectives;  To find out how donor’s technical assistance affects microfinance institutions sustainability,  to establish how donor’s financial services affects microfinance institutions sustainability and to examine donors advocacy role with regards to policy making contributed microfinance institutions sustainability.

A descriptive research design was presented employing both quantitative and qualitative approaches to ensure enough data is collected, analyzed and discussed in an appropriate manner both numerical/statistical (quantitative) and descriptive (qualitative). The study used a sample size of 97 respondents who were selected using kreceie and morgan table of sample size determination from a total population of 136 respondents.

The study concludes that the government of south Sudan should implement the advice from donors since this will help in ensuring that the micro finance policies in the country enable it to improve on the livelihood of the people who need it the most.

The findings in the study also shows that donors do not offer financial advice to the government, this therefore indicates that the government does not consider advice from the donors very much therefore the decision done by the government regarding are purely made the south Sudan administration.

The government of south Sudan should work hand in hand in order to design policies that enable the effective operations of micro finance institutions this will help in ensuring that the people of south Sudan are well covered with micro finance institution business.

The study recommends that government of south Sudan should implement the advice from donors since this will help in ensuring that the micro finance policies in the country enable it to improve on the livelihood of the people who need it the most.

CHAPTER ONE

1.1 Introduction

This chapter presents background to the study, problems statement, general and specific objectives, research questions, significant of study, scope of the study, conceptual frame work and definition of key terms. The focus for this study will be Rural Finance Initiatives microfinance institution operating in Munuki Payam that receive donor support from UNDP, USAID and UKAID in form of grants, technical assistance and advocacy for sector growth

1:2 Background of study

Microfinance has been globally established as a leading development tool to combat poverty and more specifically aimed at economically empowering the poor. It was not prominent before the 1970s but after the emergence of microfinance in Bangladesh, it expended very rapidly in the world. With more than 3,000 microfinance institutions now operate around the world, (Reed, 2011).

In recent years, many donors focus more attention on microfinance, particularly in its interactions with low-income members by promoting sound macroeconomic policies and structural reforms to ultimately achieve higher standards of living in low-income countries.

In The Philippines, after the formal recognition of microfinance by the government in 1997, ongoing initiatives and donor-supported programs have encouraged the expansion of microfinance outreach to the poor. Largely due to trainings and technical assistance provided by donors, rural banks are increasingly adapting their services to tap the microfinance market. While in Africa, Ethiopia is one of fast growing in the microfinance industry which has played a very greater role in poverty reduction with its strategy of operational framework translated into the global Millennium Development Goal targets to national action (UNDP 2005). Microfinance service intervention in Ethiopia have also be considered as one of the policy instrument of the government and non-government organizations (NGOs) to enable rural and urban poor increase output and productivity, induce technology adoption, improve input and productivity,  improve input supply, increase income, reduce poverty and attain food security (Wolday 2000).

However in South Sudan microfinance industry is at its infancy stage. According to study by Central Bank of Sudan and South Sudan (BOSS) 2008 indicated that microfinance sector covers 1% – 3% of the potential clientele. Government and other major development actors have equally recognized that the lack of access to financial services by low income groups have been the core constraints in the fight against poverty in the country, attributed to neglect of the poor by the mainstream, compounded with ever declining support from development partners.

Hussein (2008) countered that although various financial services are provided in the country, microfinance does not in reality exist in Sudan and South Sudan. Existing evidence proves that to the present days, most micro-lending being done by NGOs through community-based microfinance programs that are simple and have less complex procedures than commercial banks. The challenges faced by these programs is the transition from ‘charity’ to ‘credit’ and the urgent need to overcome the dependency among the people after long periods of aid relief since the mid1950s, there are over 100 local and foreign NGOs, working in direct coordination with government authorities, actively providing microcredit and capacity building, support operation in form of grant or charity-based. In recent joint World Bank – UNDP Mission report, about 90% of the population in the South Sudan is estimated to be living below the poverty line of less than $1 a day. One of the primary causes is low injection of direct foreign investments that are essential for revitalization of the industrial sector and promotion of microfinance as an effective tool for poverty reduction in the country.

Armed conflicts obviously have devastating consequences on development as it’s overwhelmingly depleted social, human and economic capital. South Sudan currently has very low population due to series of civil wars resulted in the loss of over 1.5 million lives as a direct result of the war and war-related impacts has also led to a huge humanitarian catastrophe where 2.5 million people become internally displaced, while more than 3 million sought refugees in neighboring countries.  To the present days, most parts of South Sudan continue to be haunted by inter and intra tribal clashes, sporadic political tensions, food insecurity and widespread poverty. Meanwhile, in the recent released Poverty Incident Report for Southern Sudan, one out of ten Southern Sudanese is poor, that is 99% of the total population. The large population is illiterate and lives below poverty with either insufficient job opportunities or access to financial services from formal banking system. The above enumerated circumstances made it difficult for microfinance institutions to thrive in South Sudan in spite of huge donor’s financial, technical and advocacy role in the industry; many did not expand in terms of client outreach over the past years and still face many challenges and weaknesses in physical infrastructure (equipment, telecommunications, transport) ownership and governance structures in NGOs, absence of an effective geographical network, inadequate access to commercial sources of funds, and unclear regulation and supervision of microfinance industry;

1:3 Problem Statements

The performance of microfinance institutions in terms of sustainability in South Sudan is not encouraging despite the fact that international and national development partners have been giving high priority for business sustainability to continue servicing the poor for many years. In spite of huge donor’s aid to microfinance institutions, the business sustainability remain a big challenge and is seriously failing in South Sudan.

According to UNDP report, 90 percent of domestic microfinance programs operating in 2011 were either not longer in operation or were no longer lending capital two years later after the 2013 civil war broke out in Juba spreading to other states of the South Sudan despite the fact that some donors continue to support those microfinance institutions. Furthermore most microfinance programs report difficulty in sustaining its operations without continues grants, external fund raising, technical assistance and creation of favorable environment for industry growth and to remain sustainable. This study therefore aims at establishing effects of donors’ aid on microfinance sustainability in Munuki Payam Juba County focusing on Rural Finance Initiatives operating in the area.

1:4 General objective/ purpose of the study

To establish the effects of Donors Aid on Microfinance Institutions Sustainability in Munuki Payam Juba County.

1:5 Specific objectives of the study

1. To find out how donor’s technical assistance affects microfinance institutions sustainability
2. To establish how donor’s financial services affects microfinance institutions sustainability

III.       To examine donors advocacy role with regards to policy making contributed microfinance institutions sustainability

1:6 Research questions

1. How donors’ technical assistance affects microfinance institutions sustainability?
2. How donors’ financial service affects microfinance institutions sustainability?

III.       What advocacy role do donors play in microfinance institutions regulation for business sustainability?

1:7 Scope of the study

The scope of the study describes the boundary to the study. It shows the restrictions that the researcher imposes on the study to determine its boundaries (Amin, 2005). This boundary shows geographical area, subject matter, content, and time frame of study

1. The geographical scope; this study will be carried out in Munuki Payam Juba County focusing on effects of donors aid on microfinance institutions sustainability operating in the payam, targeting institutional staff, clients and partners working within and around the payam. However due to insecurity, logistic, finance difficulties, government restriction etc. the researcher will limits the study to those clients and staff located closer to the institution for easily access
2. The subject-matter (or thematic) scope provides the boundary of the subject matter being studied. In this research, the subject matter in this research will be limited to three objectives highlighted above

III.       Time scope: This study will take four to five months, however due to unpredictable security situation within the selected payam of study; the study will take five to seven months and will focus on the effects of donor’s aids in microfinance institutions sustainability, challenges facing both donors and microfinance institutions in sustaining the business and to draw conclusion and some recommendations on areas donors aids should be focus on other than whole process depending on donors aid

1:8 Significance of the study

This research aims at producing results that can be beneficial and valuable to different users and players of microfinance business highlighting donor’s key roles and responsibilities for business sustainability

Donors focusing on achieving institutional; financial, technical assistance and advocacy roles for microfinance sustainability in South Sudan, the study will contribute towards domestic microfinance institutions sustainability as the business depends heavily on donors funding to meet its goal on rural development, poverty reduction and empowerments. Donors will also know from a research point of view a different insight of what is really happening within Microfinance business and their funds.

Micro-enterprises the owners of the enterprises will be able to know their contributions towards the success and sustainability of the microfinance institutions to take up their ultimate role in supporting the performance of the institutions to remain sustainable and increases its outreach especially in rural.

Researchers the study will provide a source of reference for future study on microfinance institutions. It will also act a source of literature for academics in the field of entrepreneurship.

Society since the study seeks to establish factors of sustainability of microfinance institutions; this study will prove invaluable information to them indirectly, though, for it would eventually help further microfinance institutions sustainability which is a source for finance to them.

Government plays a vital role in helping microfinance institutions sustainability by creating good legal framework, adequate information, and supportive regulations. Keeping in mind the above mentioned facts the researcher will give some suggestions and actions plan to be taken by the government regarding microfinance business.

1.9 Definitions of key terms

Microfinance, according to Otero (1999) is “the provision of financial services to low-income poor and very poor self-employed people”. These financial services according to Ledgerwood (1999) generally include savings and credit but can also include other financial services such as insurance and payment services. Schreiner and Colombet (2001) define microfinance as “the attempt to improve access to small deposits and small loans for poor households neglected by banks.” Therefore, microfinance involves the provision of financial services such as savings, loans and insurance to poor people living in both urban and rural settings who are unable to obtain such services from the formal financial sector.

1:9 Conceptual frameworks

Donor aid (Independent variable)                                   Microfinance institutions services

(Dependent variable)

Moderating variables

1:10 Justification of the study

It’s a requirement to attainment of bachelor degree in microfinance and community economic development by the researcher of Uganda Martyrs University

1:11 Definition of key words

Microfinance; refers to all types of financial intermediation services; savings, credit funds transfer, insurance, pension remittances, provided to low-income households and enterprises in both urban and rural areas, including employees in the public or private sectors and the self-employed.

Sustainability; Refers to the ability to continue any given activity into the future with the likely existing resources of an organization, as part of its ongoing budgetary and management processes.`

Micro-finance institution; refers to an organization that offers financial services to the poor/ low income and micro-enterprises not being served by commercial banks.

Aid; refers to provision of assistance, support to the poor by giving people loans to expand businesses

Donor; is an agency that provides support to broader access to financial services and technical assistance for micro and small enterprises. Such enterprises have historically lacked access to the formal financial system, but the growing success of many institutions provides confidence that access can be provided in many settings. It has now become possible to identify and agree that donors play key role in microfinance sustainability.

1:12 Conclusion

This chapter discusses background to study, problem statement, and purpose of study, research questions scope, significant of study, conceptual framework and definition of key terms; however the proceeding chapter will be viewing at related literature to the study.

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter present scholar’s literature in respect to specific objectives in chapter one, the literature will be viewed at effects of donors aid in microfinance institution sustainability in areas of technical assistance, financial services and advocacy for business sustainability

2.2 Donors technical assistance to microfinance institutions

Wright (2000) states that much of the scepticism of MFIs stems from the argument that microfinance projects “fail to reach the poorest, generally have a limited effect on income, drive women into greater dependence on their husbands and fail to provide additional services desperately needed by the poor.

In addition, Wright says that many development practitioners not only find microfinance inadequate, but that it actually diverts funding from “more pressing or important interventions” such as health and education, As argued by Navajas et al (2000), there is a danger that microfinance may siphon funds from other projects that might help the poor more. They state that governments and donors should know whether the poor gain more from microfinance, than from more health care or food aid for example. Therefore, there is a need for all involved in microfinance and development to ascertain what exactly has been the impact of microfinance in combating poverty.

Considerable debate remains about the effectiveness of microfinance as a tool for directly reducing poverty, and about the characteristics of the people it benefits (Chowdhury, Mosley and Simanowitz, 2004). Sinha (1998) argues that it is notoriously difficult to measure the impact of microfinance programmes on poverty. This is so she argues, because money is fungible and therefore it is difficult to isolate credit impact, but also because the definition of ‘poverty’, how it is measured and who constitute the ‘poor’ “are fiercely contested issues.

Poverty is a complex issue and is difficult to define, as there are various dimensions to poverty. For some, such as World Bank, poverty relates to income, and poverty measures are based on the percentage of people living below a fixed amount of money, such as US$1 dollar a day (World Bank, 2003).

Donor technical assistance donors should focus on government and central bank designing and implementing appropriate economic policies that foster stability, infrastructures and human resources development for microfinance institutions sustainability (USAID, 2010)

Donors’ like USAID, DFID, ECHO, World Bank and UNDP are working closely to integrate the financial systems from donors’ country to South Sudan Central Bank and microfinance institutions for better performance and sustainability of the business. According to International Monetary Fund2016, IMF technical assistance help build both institutional and human capacity in developing countries for effective policymaking. Moreover, the IMF’s surveillance and lending work often helps identify areas in which technical assistance and training can have the biggest impact for example, in the areas of inclusive growth, financial inclusion, and external vulnerabilities. In view of these linkages, achieving greater integration among technical assistance, training, surveillance, and lending operations is what IMF plays (International Monetary Fund 2016 publication).

Polices development to promote microfinance business and legal frame, are some areas of donors focus in South Sudan example World Bank, International Monetary Fund, USAID and UNDP play key role in providing technical assistance to Government of South Sudan in developing more effective institutions, legal frameworks, and policies to promote economic stability and inclusive growth; According International Monetary Fund 2016 publication, technical assistance helps countries develop more effective institutions, legal frameworks, and policies that promotes economic stability and inclusive growth. Training through practical policy-oriented courses, hands-on workshops, and seminars strengthens officials’ capacity to analyze economic developments and formulate and implement effective policies .

Monitoring system and evaluation, is another area of technical assistance donors should give to the government financial institutions and central bank, these institutions will in better position to monitor and evaluate the performance of microfinance to improve their ability to measure and compare the performance of different kinds of economic statistics, macroeconomic stability, public finance management systems, and financial governance. According Douglas Pearce and Claudia Ruiz Ortegain World Bank 2012 publication on Financial Inclusion Strategies Reference Framework cited that the first Principle for Innovative Financial Inclusion is needed to coordinate actions and maintain drive momentum for reforms. A National Platform for Financial Inclusion can play this role, and can also ensure that progress in reaching targets is monitored, and changes to strategy content are identified and implemented to improve effectiveness.

Financing and risk-sharing is one of the key area of donors such as USAID, World Bank and UNDP in does South Sudan though government and other private financial institutions continue to fail to account the funds properly or totally refuses to account for at all: GIZ cited that World Bank has an active lending portfolio of US$3.2 billion supporting MSME Finance. Support for risk-sharing facilities, including partial credit guarantees, also helps unlock the financial resources of banks and other financial institutions (Robinson (2001).

Data management and analysis is another area of donor technical assistance to microfinance and to Government of South Sudan example World Bank and International Monetary Fund provides data analysis to Microfinance institutions like SUMI and Finance Trust South Sudan: Douglas Pearce and Claudia Ruiz Ortega further expressed that enterprise surveys have been conducted in 135 countries and are the principal global source of data on enterprise performance and constraints. The World Bank also works at the country level to assess policy and regulatory barriers to MSME finance, and to survey financial-service providers (Noponen, 2005).

Support research being a tool for better understanding of local microfinance environment, (i.e. population, organizational culture, natural resources, and economy), through donors research will helps to complement in utilizing assets of the area, and reinforcing the capacity, economic, and organizational innovation.

Acknowledge and empower South Sudanese People: Other intervention donors need to do include adopting learning approaches rather than blueprint approaches to micro financing that recognize and utilize South Sudanese insights and experience. In many cases, “outside experts” are paternalistic or distrustful with resource-poor South Sudan, holding them responsible for their state as a result of low motivation, initiative, and education. This attitude reinforces charity and relief rather than the capacity building of the poor towards self-reliance and development. Participatory approaches that ensure that microfinance schemes are built around people rather than people around them; Participatory approaches are not only more culturally appropriate and hence sustainable for local needs; they foster more equitable distribution of benefits as development is accountable to a more representative community (Saam, 2007).

Developing standards and assessment tools: donors focus in South Sudan should be majorly on setting standards and assessment tools for microfinance operation example World Bank, UNDP and USAID helps in bring together national and international community to work with microfinance practitioners in the country to build consensus and commitment on core principles and standards in microfinance. Standards include organizational, operating, financial and reporting standards that will lead to the recognition of microfinance as a legitimate sector in the financial services industry (Kono & Takahashi, 2010).

Donors focus should on transformation of public infrastructures for microfinance business in case these infrastructures exist within public agencies, such as the postal system, Postal Savings Banks (PSBs), donors can take advantage to develop microfinance services on a large-scale basis using the available infrastructures like in urban if those services exist ((Fisher and Sriram, 2002).

Donor support investment without providing direct financial return, for example, ‘infrastructure’ needs like central credit bureaus and credit scoring. These are key tools to strengthen the sector, and their presence is likely to foster investment from new players (Littlefield and Rosenberg (2004).

Market infrastructure for financial system consists of services and systems that support the functioning of the microfinance industry, donors’ role include improving information technology for easy tracking for sustainability of the business (Murduch and Hashemi (2003).

Other areas of donors aid in South Sudan includes financing for information gathering and dissemination, especially on best practices that will benefit local organizations working on micro enterprise development to ensures microfinance sustainability. In 1998, Asian Development Bank, with grant assistance from the Government of Norway, established the Norwegian Fund for Micro enterprise Development, of which fund were used in information gathering and dissemination, especially best practices that will benefit local organizations working on micro enterprise development (Concern (2003).

2.3 Impact of donors’ financial services on microfinance institutions sustainability

Grants are non-repayable funds or products disbursed by one party (grant makers), often a government department, corporation, foundation or trust, to a recipient, often (but not always) a nonprofit entity, educational institution, business or an individual. Many donors viewed microfinance sustainability as linked to extension of grants to microfinance to remain sustainable and continue serving the poor, this grants helps microfinance institution sustainability in the many areas (Hamada, 2010).

Most donors grants is used by microfinance institutions in South Sudan to cover  cost of workshops, publications, and related activities like training to improves operational efficiency, sustainability, and outreach. This training should include financial management, credit and savings management and methods, and alternative management information systems. According to Asian Development Bank 2000 publication, ADB will strengthen its human resources and knowledge base through adjustments in the staff skill-mix of operational departments and offices, increasing awareness of and training staff to improve and expand microfinance business. RUFI microfinance in South Sudan uses grants of cash to increase their loans to the clients. Marek. H Working paper; WP-CEB07-020 publication cited that international donor’s presence can also attract microfinance commercial investors and leverages additional funds. Investors can value the expertise of the donors and assume that donors will add funds in case of unforeseen problem arise, ((Fidrmuc & Hainz, 2010).

UNDP, USAID and DFID key donors to South Sudan invest in a range of promising financial institutions to ensure that clients received diverse of products to improve their income levels, reached, extending outreaches both outwards and downwards as far as possible to ensures sustainability of business; Monique Cohen, CGAP July 2013 publication, cited that donors should prioritize large scale outreach and support financial institutions with potential for sustainability and growth.

Promotion of the twin goals of sustainability and impact in one area donors countries are investing in to ensure microfinance remain sustainable and have greater impact on its clients through monitoring  Microfinance progress against both goals. Monique Cohen, CGAP July 2013 publication further expressed that donors should promote the twin goals of sustainability and impact; monitor MFI progress against both goals (Brehanu & Fufa, 2008).

Encourage market research to better understand client preferences and the constraints that prevent the poor from taking best advantage of financial services (i.e. literacy, land titles, etc.) According Calgagovski J and group 1991.Research is an invaluable tool to better understand and support microfinance initiatives. An analysis of the local microfinance environment, (i.e. population, organizational culture, natural resources, and economy), helps to promote microfinance strategies that complement these realities, utilizing assets of the area, and reinforcing the capacity for social, economic, and organizational innovation. Institutional appraisal is another research tool that allows donors to better access and support MFIs’ poverty outreach and impact, the quality of the financial services and the loan portfolio, governance and transparency, management capacity and efficiency, financial performance, and plans for the future.

Support proactive institutions that develop delivery mechanisms and products to meet client needs; Calgagovski J 1991 and group further observed that supportive Micro enterprise Initiatives is important to remember that Micro enterprise development is an essential extension of microfinance schemes. National and international actors can promote legislation, business services, and infrastructure to enable African micro entrepreneurs and produces to increase market opportunities, technical know-how, and management (Brehanu & Fufa, 2008).

Microfinance organizations might spend cash that comes without strings attached more wisely than they would use resources from in-kind grants with the same worth; According to Hari. S CGAP uses its small grant facility to support a small number of promising MFIs directly or through networks. Since its inception, CGAP has invested nearly $21 million in 35 MFIs of all kinds. As a group, these MFIs serve about 2 million poor clients. Perhaps more important than the direct reach of these investments, however, CGAP’s investments demonstrated to donors and others a new institutional approach to funding anchored on performance-based contracts, mutual accountability, institutional performance, and shared risks (Mondragón-Vélez & Glen, 2011).

The emergence of microfinance institutions represents an option to going to informal moneylenders and presents a way to eliminate the borrowing constraint in developing countries, however because of lack of liquidity most of the poor developing countries they are not able on themselves start up micro finance institutions however through donor support they are able to start up they are able to extend credit to low income earners (Armendariz de Aghion & Morduch, 2005).

In countries where the financial system is not well developed and functioning, donor support is necessary and microfinance can lead to an increase in the individual’s utility and wealth by enabling him or her to increase consumption and saving. It allows the individual to dissave and save which makes it possible for each individual to smooth consumption and follow his or her optimal lifetime consumption (Prachathai, 2011).

Most MFIs that have proven self-sufficient have tended to loan to borrowers who were either slightly above or below the poverty line in their respective country. These MFIs are able to capture economies of scale by extending larger loans to the marginally poor. Although still an open question, this evidence leads many to conclude that if MFI self-sufficiency is desired, then the very poor will not be reached by MFI services. That is, the MFI will not be able to achieve enough depth to reach those who need the credit the most (Prachathai, 2011).

In financial institutions savings are transformed into deposits, which may either be normal savings or time fixed deposits, with increase in saving in future donors are able to leave micro finance institution are able to start up business for themselves. 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. For this reason financial institutions have a task of attracting customers to keep deposits with them. This is known as savings mobilization. It involves tapping the savings the public may hold by provision of several assets in which people can save (Kaboski & Townsend 2006).

Financial institutions provide a system where savers deposit their amounts and borrowers can access such amounts. This ensures an efficient transformation of mobilized funds into real productive capital. Financial institutions comprise of both the formal and informal sector.

According to Steel and Andah (2003) as part of the financial sector reforms, financial institutions in South Sudan need donor support because high levels of poverty among the people and very poor underdeveloped financial sector this has made majority of south Sudanese have never reached at the Bank. The objective is to establish a decentralized and sustainable micro-finance system, prudentially regulated with close linkages with the formal financial sector, and an effective outreach to the poor.

Savings is a foundational pillar in inclusive financial system. Savings contributes to financial inclusion at the client, microfinance institutions and industry levels. Savings services strengthen the finances of low- income households, savings deposits strengthen the funding base or microfinance and are the basis for a competitive, efficient and sound microfinance industry.

On a micro level, there’s of course an extensive body of academic research to explain how a well developed (deep) financial market contributes to economic growth in a country, an industry and in individual firms (Yin, 2009).

MFIs that intermediate deposits are the best positioned to sustain growth and innovation. MFIs that are funding growth by mobilizing local savings as regulated financial intermediaries have derived benefits from deposit-based funding in at least three ways. First, deposits tend to be more stable and scalable funding source relative to other options. Microcredit organizations typically face challenges with wholesale funding related to finance costs, term structure, currency risk, administrative effort and ultimately getting enough capital to fund growth that keeps up with demand. Also the recent international financial crisis has demonstrated the liquidity risks associated with over dependence on foreign debt funding. In addition to the stability of savings in most markets, it’s also a less expensive funding source (Golafshani, 2003).

The second benefit manifests in incentives that drive a MFIs approach to growth and expansion. Deposit based institutions link their asset growth to deposits and therefore growth is based on service to savers and the perception of savers of the integrity to MFI. These MFIs tend to be disciplined, service-oriented and cautions about their reputation. Deposit funding also links the MFI evolution to economic realities since MFIs can only grow if they are successful in intermediating effective market demand for savings and credit (Saam, 2007).

Finally deposit-based MFIs enjoy customer loyalty since customers that save in an institution have a sense of trust and ownership that credit clients don’t necessary have. For some customer’s savings may be the first step to accessing credit and other services later on (Fernando, 2007).

To increase savings, policies should be focused on the major determinates of savings in the economy. The mobilization of small and micro savings respond to demand if the poor and is commercially viable source of funds. It should be noted that successful savings mobilization requires a macroeconomic environment that is conducive. Financial institutions need to put in place strategies that are dynamic and aggressive to encourage savings by enhancing public confidence, provide cost effective 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, (Bagonza, 2001).It’s important to understand why people save, in doing so financial institutions will create products that are suitable and complement with the needs of those who save,(Fin scope Ug, 2009).

Communities in south Sudan have always raised capital for farming, petty trading and other income generating activities through savings mobilization. It is this traditional arrangement that modern micro finance institutions are trying to modify in the mobilization of savings. Over the last decade, micro finance institutions have found those poor households are interested in a variety of savings services and products. Deposit services allow low income household to save for large expenses like dowries, or school fees, accumulate funds for future investment as purchasing a cow, or prepare for periods such as rainy periods when they may have little or no income; this is according to the microfinance experience with savings mobilizations and that they are basically two reasons why microfinance should mobilize savings. Locally mobilized savings are potentially the largest and the most immediate available source of finance for some microfinance institutions, and there is a vast demand for institutions savings services at the local levels (.

Donors provide information on financial management, Glaubitt et al, (2006), asserts 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.

Donors assist in determining credit worthiness, financial institutions have failed to determine credit worth borrowers simply because they have inadequate credit policies, failure of micro finance institutions 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 MFIs’ 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.

Financial institutions hold and lend out cash, 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

Donors help in ensuring that there is a balance between the demand of the people for financial services and credit this actually promotes economic development. Extending credit to low income earners, People living in poverty, like in south Sudan 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 ((Armendarizde Aghion & Morduch, 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 lenders 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 (Kono & Takahashi, 2010).

2.4 Impact of donor’s advocacy role on microfinance institutions regulation for business sustainability

Donors roles in environmental influence involves bringing together private sectors, network organizations, civil societies and regulatory bodies to work together to ensure business sustainability Calgagovski J 1991 and group pointed out that donors promote networking and cooperation: national and international actors should reinforce cooperation and coordination among actors at all levels in the design, management, and assessment of microfinance initiatives. Mechanisms should be created for the exchange of knowledge and experience among African microfinance practitioners, including the use of the Internet, dissemination of written material, field level practitioner exchanges, and best practice workshops. Regional coordinating committees and sub-regional conferences can bring together microfinance policy makers, leaders, and representatives from bilateral, multilateral and intergovernmental development partners to access and compare microfinance progress. Coordination among various microfinance actors also ensures complimentary rather than competing policies.

Micro finance institution usually faces numerous challenges in assessing. On the one hand we could expect MFIs to flourish when the economy does: there are more opportunities to start up a small business and existing small businesses are growing and thus increasing their demand for finance, default rates drop because of the success of the businesses. The incomes from the households are rising, leading them to be more confident, spend more money and be more willing to take more risk by investing capital in a business venture. (C. Ahlin, J. Lin and M.Maio, 2011).

Donors enable micro finance institutions inn 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.

Donors help in ensuring that there is capacity building in a micro finance institution, 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).

Donors provide micro finance institutions with funds, The key challenges confronting the microfinance institutions in developing countries such as south sudan 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).

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).

Donor help in provision of mechanism for 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 regulatory guidelines for the apex bodies in the semi-formal and informal sectors for the supervision of their members; therefore the presence of donors is essential in the business environment, (Najoragan, 2000).

Donors provide 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. (Winiwiski, 2009).

There should be 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.

Donors encourage improvement on the level of funding, The key challenges confronting the microfinance institutions in developing countries such as south sudan 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)

Donors encourage Savings so as to 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 ‘useful lump sums’, enabling them to smooth consumption and mitigate the effects of economic shocks,( Rutherford, 2008). Secure savings also can provide a measure of independence to socially and economically vulnerable individuals, notably women and children and unlike credit; the benefits of savings are not limited to the economically active. Although significant research has document the benefits of savings to the poor, the microfinance sector remains focused largely on credit delivery. Funders and government often don’t realize how vital asset- building policies and that savings mobilization can bring many benefits to the poor clients and microfinance providers (e.g. stable funding and protection from the foreign exchange risk.

Savings are fundamental to sustainable economic development. Savings are by far the most frequent source of funding to microfinance startup and expansion. They also enable households to build for the future and better prepare for unexpected emergencies. Woccu credit union savings mobilization profit in Latin America have demonstrated that lower income people will substantially increase their savings deposit if provided with convenient service, market returns and security for their savings. Yet millions of people throughout the region lack access to safe, reliable and convenient savings services,( Winiwiski, (2009).

Johnson and Rogaly (1997, p.122) state that “NGOs aiming for poverty reduction need to assess the impact of their services on user’s livelihoods.” They argue (1997) that in addressing the question of the impact of microfinance, NGOs must go beyond analysing quantitative data detailing the numbers of users, and volumes and size of loans disbursed, to understanding how their projects are impacting on clients’ livelihoods. They state (1997, p. 118) that the provision of microfinance can give poor people “the means to protect their livelihoods against shocks as well as to build up and diversify their livelihood activities”. Therefore when analysing the impact of microfinance the overall impact of the microfinance services on the livelihoods of the poor needs to be taken into consideration. That is the focus of this study.

A livelihood security approach according to Concern (2003) aims for a holistic analysis and understanding of the root causes of poverty and how people cope with poverty. They identify livelihood shocks such as natural disasters and drought, the social, political and economic context, and people’s livelihood resources such as education and local infrastructure as factors affecting people’s livelihood security (ibid.). Therefore, when analysing the impact microfinance is having on livelihood security, as is the objective of this dissertation, an holistic analysis of people’s livelihood security must be conducted, rather than just focusing on the material/economic impact microfinance is having on the livelihoods of the poor.

Traditionally, the impact of microfinance projects was assessed by the changes in the income or well being of the clients. Mansell-Carstens, cited in Rogaly (1996, p.103) argues that such a focus is flawed because respondents may give false information. It is also very difficult to ascertain all the sources of income of a client, so a causal effect is difficult to establish, and it is also difficult to establish what would have happened if the loan was not given. Therefore a broader analysis is needed that takes more than economic impact into consideration.

We have seen that poverty and livelihood security consist of economic and social conditions, therefore,  when analysing the impact of microfinance, social impact must be assessed. Kabeer (2003) states that wider social impact assessment is important for an organisation’s internal learning process, as an MFI should be aware of the “full range of changes associated with its efforts and uses these to improve its performance”. She considers social impact to relate to human capital such as nutrition, health and education, as well as social networks (2003).

Zohir and Matin (2004) make a similar point when they state that the impact of microfinance interventions is being under-estimated by “conventional impact studies which do not take into account the possible positive externalities on spheres beyond households”. They propose that impact should be examined from cultural, economic, social and political domains at individual, enterprise and household levels (2004).

McGregor et al. (2000) states that wider social and economic impacts can occur through the labour market, the capital market, the market for goods consumed by poor people, through production linkages and through clients participation in social and political processes.

Chowdhury, Mosley and Simanowitz (2004) argue that if microfinance is to fulfil its social objectives of bringing financial services to the poor it is important to know the extent to which its wider impacts contribute to poverty reduction. In the following sections I will examine the findings from wider assessments of microfinance interventions at a household and community level, to show what learning can be gained when impact assessments have a broad scope of analysis.

Health and education are two key areas of non-financial impact of microfinance at a household level.Wright (2000) states that from the little research that has been conducted on the impact of microfinance interventions on health and education, nutritional indicators seem to improve where MFIs have been working. Research on the Grameen Bank shows that members are statistically more likely to use contraceptives than non-members thereby impacting on family size (ibid.). Littlefield, Murduch and Hashemi (2003, p.3) also acknowledge the sparse specific evidence of the impact of microfinance on health but where studies have been conducted they conclude, “households of microfinance clients appear to have better nutrition, health practices and health education than comparable non-clientb households”. Among the examples they give is of FOCCAS, a Ugandan MFI whose clients were given health care instructions on breastfeeding and family planning. They were seen to have much better health care practices than non-clients, with 95% of clients engaged in improved health and nutrition practices for their children, as opposed to 72% for non-clients (Littlefield, Murduch and Hashemi, 2003).

Microfinance interventions have also been shown to have a positive impact on the education of clients’ children. Littlefield, Murduch and Hashemi (2003, p.4) state that one of the first things that poor people do with new income from microenterprise activities is to invest in their children’s education. Studies show that children of microfinance clients are more likely to go to school and stay longer in school than for children of non-clients. Again, in their study of FOCCAS, client households were found to be investing more in education than non-client households. Similar findings were seen for projects in Zimbabwe, South Sudan, India, Honduras and Bangladesh,

Robinson (2001) in a study of 16 different MFIs from all over the world shows that having access to microfinance services has led to an enhancement in the quality of life of clients, an increase in their self-confidence, and has helped them to diversify their livelihood security strategies and thereby increase their income.

Following a three-year study of 906 clients, ASA17 an MFI working with 60,000 rural women in TamilNadu, India, found that their project had many positive impacts on their clients (Noponen, 2005). The programme was having a “positive impact on livelihoods, social status, treatment in the home and community, living conditions and consumption standards” (2005, p.202). Compared with new members, some of the findings showed that long-term members were more likely to live in tile roofed and concrete houses, to have a higher percentage of their children in school, to have lower incidence of child labour, to be the largest income provider or joint provider in the home, and to make decisions on their own as regards major purchases (Noponen, 2005).

CHAPTER THREE

RESEARCH METHODOLOGY

3.1: Introduction

This chapter will discuss the methods that will be used in the study of effects of donor’s aid on microfinance institutions sustainability in Munuki Payam Juba County. The chapter will be structured into research design, sampling techniques, sample size, data collection techniques, reliability and validity of data, ethical values, limitation and delimitation.

 3.2 Research Design

A descriptive research design was presented employing both quantitative and qualitative approaches to ensure enough data is collected, analyzed and discussed in an appropriate manner both numerical/statistical (quantitative) and descriptive (qualitative). Justification was drawn on effects of donors’ aid on microfinance institutions sustainability in Munuki Payam Juba County. The researcher will use both primary data from selected respondents and secondary data from microfinance practitioners, NGOs funding microfinance institutions and some commercial banks with microfinance components.

3.3 Area of the study

This study was conducted in Munuki Payam Juba state falling within Juba city formally Central Equatoria state. It is small area located west of main city along Juba Mundri road. Munuki lies close to Bilpam military general headquarter, heavily populated and busy commercial center with traders predominately from Uganda and Sudan, due to the current insecurity isn’t possible to take the coordinates of the location as researcher will be associated for taking the coordinate for other purpose other than for the study by national security. Population estimate has become difficult as people continue to leave the location on daily bases due to poor business caused by devaluation of South Sudanese Pounds against US dollars and displacement. Though Munuki is located out of the main city, being busy commercial center has got four commercial banks namely, three microfinance institutions, two SACCOs and money transfers which will constitute part of study

3.4 Population of study

Dooley (2010) defines a study population as the collection of all the individual units or respondents to who the results of a survey are to be generalized. This definition suggests the close association between and surveys. Amin’s (2005) definition provides an elaborative of Dooley’s pointing  out that a population is a complete collection, or the universe, of all the members or units of a group that is of interest in a particularly study. Therefore the population for this study will be 136 respondents

3.5 Sampling techniques

In quantitative researches, it is believed that if the sample is carefully obtained, it is then possible to generalize the results to the whole population as suggested by Amin (2005). The researcher will use simple random sampling techniques where each respondent has equal chance of participation.

3.6 Sample size

According to Trochim (2005), Sampling is the process of selecting units (e.g., people, organizations) from a population of interest so that by studying the sample we may fairly generalize our results back to the population from which they were chosen.  Using krecie and morgan table, technique of sample size determination from a total population of 136, the study will select a total sample population of 97 respondents.

Table 1: Table showing the sample size of respondents

3.7 Data Collection Techniques

In this study, researcher will use both primary and secondary data collection techniques.

In using the primary data collection method, will explore the originality of data through gathering information relevant to the study. Primary data will obtain respondents from Rural Finance Initiative staff and clients residing within the Payam. The researcher will use of questionnaires and interview manuals, gather data from the clients.

Secondary data collection methods, supplementary to the above method researcher will obtained reports from Rural Finance Initiative, dissertations, text books, the internet and other materials(such as journals, newspapers, etc.) as found useful to the study.

3.8 Data Analysis

Data that will be obtained through questionnaires and interviews by the researcher will be grouped based on the research questions and will be analyzed by descriptive statistics such as percentages, mean scores and standard deviations. The statistical package for social sciences (SPSS) will be used defending on accessibility to the software leading to conclusions on the objectives of the study. On completion of data collection, the researcher will check for completeness of the questionnaires. The data will be arranged and grouped according to particular research questions. This included, the mean, mode, the media, the variance and the standard deviation, the advantage of using this package its ability to handle large amounts of data and quite efficient. Coding categories will be developed for organizing and sizing qualitative data collection according to research questions. This will involve going through data and numbering it sequentially, a careful search through the data for regularities and patterns related to research questions the study intends to answer, writing down words and phrases to be used as a mean of sorting out descriptive data so that materials bearing on research questions will be physically separated from other data.

3.9 Reliability of Instruments

The reliability of an instrument refers to the ability of the instrument to collect the same data consistently under similar conditions (Burns, 1997). The concept therefore deals with the accuracy of the instrument and the consistency of the data collected by it. It is therefore based on two assumptions: (a) that the study can be repeated, and that different people can have similar interpretations of events.

The researcher will therefore do the following to enhance reliability

1. Appropriately clarifying the purpose and objectives of the research so that all instruments are used for that purpose and the objectives
2. Explaining the research perspective in detail, clarifying the research assumptions and biases, so as to guide the construction of the instruments

III.       Adequately explaining data collection and data analysis procedures to promote consistency in the data collected

3.10 Validity of Instruments

Validity is important in determining whether the statement in the questionnaire instrument and interview manuals is relevant to the study. Content and constructive validity is obtained by the help of the supervisor’s input. According to Amin (2004), validity can be and in this case is assured by use of the content validity index (C.V.I) where the following results were obtained (for both the interviews and questionnaires):

C V I = Agreed items by all judges as suitable

Total numbers of items being judged

3.11 Ethical considerations

Once the researcher is about to start administering questionnaires, interviews or accessing other relevant source of data for this study, the researcher will first request for an introductory from Uganda Martyrs University for carrying out this study. Booth et al (2008) revealed that when a researcher creates a community of shared understanding and interest, he or she sets a standard for his or her work, higher than he or she could set for him or herself alone and this is what the researcher aimed at while conducting study. The researcher will consider taking into account research values of voluntary participation, anonymity and protection of respondents from any possible harm that will arise from participating in the study. Thus the researcher; will introduce the purpose of the study as for fulfillment of a bachelor’s’ study program, present introductory letter from the Uganda Martyrs University to build confidence among the respondents to participate freely and voluntary. The researcher will also assure the respondents of confidentiality and protection from any possible harm that may arise from the study, findings of study will be used for study purposes only and will be shared upon request by the respondents on completed of the study.

3.12 Limitations and delimitations of the study.

Taking keen analysis of current political, socio-economical and widening food security gap in the country, the researcher is likely to face challenges in carrying out this research as highlighted;

Lack of trust and suspicion from respondents given the current political climate in South Sudan which some respondents may fear to give credible information due to national security crackdown of freedom of speech both in public and even in private sectors

Logistic challenges as movement in and out of Juba is getting difficult on daily bases due to fuel shortage, high transport cost, increasing insecurity within and out of the city couple with restriction from the government.

The researcher will likely face shortage of fund to reach the required number of respondents due continue devaluation of South Sudan Pounds against US dollars making printing the required questionnaires and traveling to all proposed areas of studies difficult

The possibility of missing out some proposed respondents for this study is very high due to rapid collapse of financial institutions and increasing insecurity leading to displacement of respondents in South Sudan

To minimize those risks, the researcher will limit this study to areas accessible, safe and reducing the number of respondents to those willing to participate in the study and areas accessible by either footing or motorbike to reduce cost, safety, time etc.

3.12 Conclusion

This chapter dealt with research methodology to be used in the data collection; however the proceeding chapter will be for data presentation and analysis

CHAPTER FOUR

PRESENTATION, ANALYSIS, INTERPRETATION OF FINDINGS

4.0 INTRODUCTION

This chapter presents the results in reference to objectives in chapter one. Gender of respondents, Age of respondents, Education level of respondents, Range of years worked

4.1 FINDINGS ON GENERAL INFORMATION

4.1.1 Findings on the Gender of respondents

Depending on the sample of respondents that was taken, below is the table showing the gender distribution.

Table 2: Shows the findings on the gender of the respondents

Source: primary data

Table 4.1.2 above shows that 60% of respondents were male and 40% were female. This means that the biggest percentage of respondents and employees in the organization that were sampled were male and apart from that it also shows that male gender dominate the work force of the organizations, this also indicates that my gender there are few women who participate in the micro finance industry.

4.1.2 Findings on the age of respondents.

The age groups of the respondents were represented as shown below;

Table 3: Shows findings on age of the respondents age

Source: primary data

The table and pie-chart above shows that 33.33% of the respondents are in the age group of 18-29 while 50% of the respondents are in the ages of 30-39 while the remaining respondents of 17% are in the ages of above 40 years. This showed that respondents between the age 30-39 dominated all therefore are still in an active range therefore can give sound and clear responses in relation to the questions which gives accuracy in data collected.

4.1.2 Findings on the education level of respondents.

The education levels of the respondents were as shown in the table below;

Table 4: Shows findings on education level of respondents

Source: primary data

From the findings above the table this implies that the degree holders are able to give reliable information about the topic since they have enough knowledge and qualifications.

4.1.4 Findings on the number of year’s respondents have worked.

The number of year’s respondents have worked with the organizations;

Table 5: showing the number of years respondents have worked.

Source: primary data

The table shows that majority of the respondents have worked for the time period of 6-10 years and therefore have much knowledge about the organization thus can give adequate information.

The bar graph above shows that majority of the respondents have works between  the range of 6-10 years this shows that  the majority of the respondents have enough knowledge on the operations of Micro finance institutions and therefore they could have good information regarding the subject under study. Then the least of respondents have worked there for 10 years and above however those that have worked between 3-5 years are more than them.

4.2 How donor’s technical assistance affects microfinance institutions sustainability

How donor’s technical assistance affects microfinance institutions sustainability are summarized in the table below;

Table 6: Shows How donor’s technical assistance affects microfinance institutions sustainability.

Source: primary data

The findings in the study further indicates that majority 40% of the respondents strongly agreed that donor advise the government to focus on stability of the economy , 30% agreed, only 10% disagreed and 15% strongly disagreed, this findings further indicates that donors advise the government to focus on stability of the economy.

The results in the study further indicates 60% of the respondents strongly agreed that donors integrate the financial systems from donor country to south Sudan, 20% agreed and 10% disagreed and the remaining 10% strongly disagreed.

The findings of the study shows that majority 38% of the respondents strongly disagreed that donors design policies to promote micro finance business and legal frame work, while 32% agreed, and only 15% agreed and strongly disagreed, this results also indicate that donors in south Sudan do not have the legal power to design policies to promote micro finance business and legal frame work.

The findings in the study also shows that 31% of the respondents strongly disagreed with the fact that donors offer technical financial advice to the government, 31% also disagreed, none of the respondents was neutral and 20% strongly agreed and the remaining 18% also agreed, this results from the field therefore indicates that donors donot offer financial advice to the government.

According to the results in the study most 36% of the respondents disagreed that monitoring and evaluation systems is done by donors, 26% also strongly disagreed and only 15% strongly agreed and 15% also agreed, these findings therefore indicates that donors do not offer monitoring and evaluation.

The study findings also shows that 41% of the respondents strongly agreed that donors offer finance and sharing of risks, 21% agreed, only 8% were neutral, 20% disagreed and the remaining 20% strongly disagreed.

The study findings shows that 31% of the respondents agreed that donor help in data management, 27% strongly agreed, none of the respondents was neutral, 21% disagreed and the remaining 21% strongly disagreed. This finding also shows that the donors help micro finance institutions in data management.

4.3 Impact of donors financial services on micro-finance institution sustainability

Table 7: Shows Impact of donors financial services on micro-finance institution sustainability

Source: Primary Data

The results from the table above indicates that majority 30% of the respondents strongly agreed that grants are non-payment, 23% disagreed and 21% strongly disagreed and only 19% agreed, this findings therefore indicates that the grants micro finance intuitions get from donors are mainly non-refundable.

The study findings further indicates that 41% of the respondents assert that provision of training funds to staff to enhance skills and knowledge is done by donors also 26% agreed, 15% disagreed and 10% strongly disagreed, this findings also indicates that donors provide training funds to staff to enhance their knowledge.

The results in the study also indicates that majority 39% of the respondents strongly agreed that donors invest in financial institutions , 31% agreed and only 15% disagreed and strongly disagreed.

The findings in the study also indicates that 41% of the respondents strongly agreed that micro finance institutions provide goals of sustainability, 28% agreed and 15% disagreed while  the remaining 10% strongly disagreed. This finding also indicates that micro finance institutions provide goals of sustainability.

The results in the study also shows that 48% of the respondents assert that donors monitor the progress of MFI, 21% agreed and 18% disagreed and the remaining 13% strongly disagreed. This findings also indicates that donors monitor the progress of MFI.

This results indicates that 41% of the respondents agreed, 28% strongly agreed  with the fact that donors encourage market research to understand preferences 20% strongly disagreed and 11% disagreed.

The results in the study further shows that majority 30% of the respondents disagreed that donors support proactive institutions that develop delivery mechanism only 21% strongly agreed these results also indicates that donors donot support proactive institutions that develop delivery mechanism.

4.4 Advocacy role do donors play in microfinance institutions regulation for business sustainability

Table 8:  Shows Advocacy role do donors play in microfinance institutions regulation for business sustainability.

Source: primary data

The findings in the study also shows that majority 38% of the respondents hold the view that donors bring together different bodies to work together to ensure business sustainability, 31% agreed and 12% disagreed while the remaining 19% of the respondents strongly disagreed.

The findings in the study also further shows that 48% of the respondents hold the view that Regional coordinating committees and sub-regional conferences can bring together microfinance policy makers, 21% agreed and 14% disagreed and the remaining 17% strongly disagreed, this findings also indicates donors ensure that Regional coordinating committees and sub-regional conferences can bring together microfinance policy makers.

the findings in the study also indicates that 38% of the respondents strongly agreed that, Donor monitor the progress of micro finance institutions, while 41% agreed and the remaining 8% disagreed while 13% strongly disagreed.

CHAPTER FIVE

DISCUSSION, CONCLUSION AND RECOMMENDATION OF FINDINGS

5.0 Introductions

This chapter presents discussion, conclusion and recommendation of findings.

5.1 Discussions of findings

5.1.1 How donor’s technical assistance affects microfinance institutions sustainability

The findings in the study indicates that donors advise the government to focus on stability of the economy, this results is also in line with (USAID, 2010) who states that Donor technical assistance donors should focus on government and central bank designing and implementing appropriate economic policies that foster stability, infrastructures and human resources development for microfinance institutions sustainability.

The results also indicates that donors integrate the financial systems from donor country to south Sudan this is also in line with (IMF, 2016) which states that the IMF’s surveillance and lending work often helps identify areas in which technical assistance and training can have the biggest impact for example, in the areas of inclusive growth, financial inclusion, and external vulnerabilities.

According to the findings in the study the results shows that donors in south Sudan do not have the legal power to design policies to promote micro finance business and legal frame work, this contradicts with IMF, 2016 which states that Polices development to promote microfinance business and legal frame, are some areas of donors focus in South Sudan example World Bank, International Monetary Fund, USAID and UNDP play key role in providing technical assistance to Government of South Sudan in developing more effective institutions, legal frameworks, and policies to promote economic stability and inclusive growth; According International Monetary Fund 2016 publication, technical assistance helps countries develop more effective institutions, legal frameworks, and policies that promotes economic stability and inclusive growth. Training through practical policy-oriented courses, hands-on workshops, and seminars strengthens officials’ capacity to analyze economic developments and formulate and implement effective policies

The findings in the study also shows that donors do not offer financial advice to the government, this therefore indicates that the government does not consider advice from the donors very much therefore the decision done by the government regarding are purely made the south Sudan administration.

Findings in the study also indicates that donor do not do monitoring and evaluation systems , this results therefore shows that donors do not involve themselves with the duty of monitoring micro financial institutions therefore it is the government of south Sudan which does the work

The results in the study also shows that donors offer finance and sharing of risks therefore it is the donors that offer finance to the micro finance institutions of south Sudan.

The results in the study also shows that the donors help micro finance institutions in data management, therefore with the help of the donors micro finance institutions in south Sudan are able to manage their data properly.

5.1.2 Impact of donors financial services on micro-finance institution sustainability

From the findings in the study it is evident that grants given by donors is not paid back, therefore these funds are given freely to the micro-finance institutions, hence leading to proper financing of micro finance institutions in South Sudan

The study also shows that donor provide funds to the micro –finance institutions to provide training to staff to enhance their skills in micro finance this helps in ensuring that there is sustainability of the performance of micro finance institutions.

From the findings in the study the results shows that donors invest in financial institutions this also indicates that financial institutions receive most of their funds from donors in south Sudan.

The results in the study also indicates that micro finance institutions provide goals of sustainability, this findings also indicates that though micro finance institutions donors are able to provide goals of sustainability.

The results in the study also shows donors monitor the progress of MFI this therefore shows that donors pay special interest in the performance of micro finance institutions therefore they help micro finance institutions be able to perform well.

The results in the study also shows that donors encourage market research to understand preferences this helps micro finance institutions perform well in order to serve the inetrest of the members of south Sudan.

Findings in the study also indicates that donors donot support proactive institutions that develop delivery mechanism.

5.1.3 Advocacy role do donors play in microfinance institutions regulation for business sustainability

The results from the findings in the study shows that donors bring together different bodies to work together to ensure business sustainability, this therefore indicates that through the donors organizations are able to work together in order to ensure the smooth running and operations of micro finance institutions.

Findings in the study also show that Regional coordinating committees and sub-regional conferences can bring together microfinance policy makers.

The results in the study also indicate that Donor monitor the progress of micro finance institutions this helps in ensuring that there is good performance among these institutions.

5.2 Conclusions

The study concludes that the government of south Sudan should implement the advice from donors since this will help in ensuring that the micro finance policies in the country enable it to improve on the livelihood of the people who need it the most.

The study also states that donors in south Sudan do not the legal powers to design Polices development to promote microfinance business and legal frame,

The findings in the study also shows that donors do not offer financial advice to the government, this therefore indicates that the government does not consider advice from the donors very much therefore the decision done by the government regarding are purely made the south Sudan administration.

From the findings in the study it is evident that grants given by donors is not paid back, therefore these funds are given freely to the micro-finance institutions, hence leading to proper financing of micro finance institutions in South Sudan

The study also shows that donor provide funds to the micro –finance institutions to provide training to staff to enhance their skills in micro finance this helps in ensuring that there is sustainability of the performance of micro finance institutions.

The results from the findings in the study shows that donors bring together different bodies to work together to ensure business sustainability, this therefore indicates that through the donors organizations are able to work together in order to ensure the smooth running and operations of micro finance institutions.

Findings in the study also show that Regional coordinating committees and sub-regional conferences can bring together microfinance policy makers.

The results in the study also indicate that Donor monitor the progress of micro finance institutions this helps in ensuring that there is good performance among these institutions.

5.3 Recommendations of the study

The study made the following recommendations;

The government of south Sudan should work hand in hand in order to design policies that enable the effective operations of micro finance institutions this will help in ensuring that the people of south Sudan are well covered with micro finance institution business.

The study recommends that government of south Sudan should implement the advice from donors since this will help in ensuring that the micro finance policies in the country enable it to improve on the livelihood of the people who need it the most.

The government of south Sudan should enact policies that enable the donors to be able to design policies that can help micro finance institutions to be in position to grow and serve the interest of the people well.

Donors should increase on their donations to micro finance institution so that a larger number of people in south Sudan are able to acquire loans and the study also further recommends that micro finance staff should be trained more to enhance their skills in micro finance.

The study recommends that donors should monitor the progress of micro finance institutions this helps in ensuring that there is good performance among these institutions.

The study also recommends that donors should bring together different bodies to work together to ensure business sustainability, this therefore indicates that through the donors organizations are able to work together in order to ensure the smooth running and operations of micro finance institutions.

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Armendáriz de Aghion, B., & Morduch, J. (2005). The Economics of Microfinance MIT Press. Cambridge, Massachusetts.

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APPENDIX I: QUESTIONNAIRE

TOPIC: AN INVESTIGATION INTO THE EFFECTS OF DONORS AID ON MICROFINANCE INSTITUTIONS SUSTAINABILITY

A CASE STUDY RURAL FINANCE INITIATIVE IN MUNUKI PAYAM JUBA COUNTY

Dear respondent

I am Kenyi Edward Simon a student of Uganda Martyrs University, am carrying out a study on the above stated topic. You are one of the respondents randomly selected to participate in the study. The information given shall be treated with utmost confidentiality and shall only be used strictly for academic purpose.

GENERAL DATA

SECTION A:            

• Gender: Male              female

• Age a) 18 -29 b) 30 – 39 c)  40 and above

3. Educational level

Master’s degree           Bachelor’s degree                   diploma                       others

4. Which organization do you work with?
5. Rural Finance Initiative
6. KCB Bank
7. Equity Bank
8. Charter One
9. Cooperative Bank
10. For how long have you been working in your organization?

a)less than two years                           c)  6-10 years

1. b) 3-5 years                                     d) 11 years and above

SECTION B: How donor’s technical assistance affects microfinance institutions sustainability.

Key: SA=strongly agree, A=agree, N=neutral, D=disagree, SD=strongly disagree

Tick in the box where appropriate.

Please mention other causes ways how donor’s technical assistance affects microfinance institutions sustainability.

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….

Please tick one appropriate.

SECTION C: Impact of donors financial services on micro-finance institution sustainability

Key: SA=strongly agree, A=agree, N=neutral, D=disagree, SD=strongly disagree

Please mention other impacts of donors financial services on micro-finance institution sustainability.

………………………………………………………………………………………………………………………………………………………………………………………………………………Please tick on appropriate.

SECTION D: ADVOCACY ROLE DO DONORS PLAY IN MICROFINANCE INSTITUTIONS REGULATION FOR BUSINESS SUSTAINABILITY.

Key: SA= strongly agree, A=agree, N=neutral, D=disagree, SD=strongly disagree

Please mention other advocacy role do donors play in microfinance institutions regulation for business sustainability.

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

THANKS FOR YOUR COOPERATION

APPENDIX : 11

KRECIE & MORGAN TABLE FOR SAMPLE SIZE DETERMINATION