THE EFFECT OF VILLAGE SAVINGS SCHEMES ON POVERTY ERADICATION

A CASE STUDY OF BUSIIMBI SUBCOUNTY MITYANA DISTRICT

ABSTRACT

The study was carried out in Busimbi Sub County, Mityana District the effect of village saving schemes on poverty reducation among the people. The specific objectives of the study were to establish the services offered in village savings schemes commonly supporting the people, to establish the challenges being faced by village savings schemes beneficiaries in their struggle to eradicate poverty and to find out the different strategies to improve on savings cultures in Busimbi Sub county Mityana District

The research design was based on a descriptive and case study design where both qualitative and quantitative methods were employed in the collection and analysis of the data on a sample size of 70 respondents selected using purposive and random sampling technique. Data was collected by use of questionnaires and the interview guide. It was computed and analyzed using descriptive statistics and was presented using tables displaying frequencies and percentages.

The findings indicated that savings custody was the major product in village savings schemes. Other products included loans, shares, as well as financial education. The findings also concluded that the major challenge affecting village savings schemes to the society was poor savings culture among the locals and also the study findings concluded that the major strategy to overcome the challenges affecting village savings schemes is to enforce capacity building training for members, staff and board to enable them deliver financial service effectively.

The following recommendations were made; management should encourage its members to deposit daily part of profits/incomes to help them improve their savings culture, government and other stakeholders should organize training of the people on proper ways of saving and usage of the loan obtained from the village savings schemes and Savings and credit cooperatives should employ highly trained staff who can do the monitoring evaluation of the utilization of the loan.

CHAPTER ONE

INTRODUCTION

• Introduction

This chapter presents the background of the study, statement of the problem, purpose, objectives, specific objectives, research questions, scope, significance and definition of key terms.

1.1 Background to the study

According to Chambers (2015), saving is setting a side of available resources or income for future use. Savings can be in cash or in kind but for purposes of this study, savings is limited to cash. Savings scheme is an informal financial sector that has been created deliberately by self-mobilized and self-administered individuals or community groups who mobilize their savings at agreed intervals, and make them available and accessible to their members in form of credit, Ashe (2012). The purpose of the fund is to support members financially to start or improve their small businesses, acquire productive assets, or buy life enhancing consumer durables such as blankets, bicycles, house hold utensils and children’s school uniforms. Interest charged on those loans contributes to building the group’s fund (Ibid & Zeller, 2011).

The members of the savings schemes are more likely to own livestock and other valuable assets, despite facing obligations to spend their individually earned incomes on the general
consumption needs of the family, compared to their counterparts who did not earn any income. Involvement in the developmental activities was seen as a major strategy through which these women improved economic and social statuses (Abu, 2011).

Village Savings schemes were initially started by women’s groups in Niger, West Africa as a means of empowering the groups’ members to manage their own funds. The concept was then successfully transferred to India and Bangladesh. In 2012, CARE started the first Village Community savings in Tanzania, (Tuly 2012). Village savings has its roots in ancient cultures and was most recently adopted for use by micro-finance institutions as a way to control costs Most groups can be found in the rural parts of the Kilimanjaro region, where for people who cannot provide any collateral, access to a savings loan even of very minor amount is almost impossible, (Morisset and Neda, (2011).

More than three quarters (¾) of the world population constitutes a much less fortunate group herein described as the poor. Their lives are characterized by malnutrition, illiteracy, disease, squalid surroundings, high infant mortality and low life expectancy as to be beneath any reasonable definition of human decency, (Robert, 2011). Chambers (2015), describe the outsider’s view of the poor “The poor are rarely met: when they are met, they do not speak; when they speak, they are often cautious and differential; and what they say is often either not listened to, or brushed aside, or interpreted in bad light.”

The poor are characterized by physical weakness through lack of food, malnutrition leading to low immune response to infections, inability to pay the cost of schooling; to buy a radio or a bicycle, to travel to look for work, or to live near the village center or a main road; are vulnerable due to lack of assets to pay large expenses or to meet contingencies, and are powerless because wealth goes with status quo: the poor have no voice (Ibid). Currently the issue of poverty is raising a lot of concern worldwide and especially in developing countries. According to World Bank Report (2012), poverty is the inability to attain a minimum standard of living. It considers
income and expenditure per capita to be yardsticks of measuring welfare hence determining those who fall under or above the minimum level and classify them as poor and non- poor respectively, (Zeller, 2011).

According to Sen (2010), poverty is a matter of deprivation and to understand poverty, it is necessary to look both at ownership patterns, exchange entitlements and the forces that lie behind them. Asset ownership has been identified as one of the key determinants of increasing households‟ abilities to raise their incomes and reduce risk of falling into poverty. According to Manfred (2011), narrowing the gap between the poor and non- poor requires increasing
accessibility and availability of financial services to low income people and increasing their ability to find employment, to participate in markets and to own productive assets such as land.

In Uganda, it is estimated that about 43% of Uganda’s population have no access to financial services, with unmet need being greatest in the rural areas. Accordingly, a number of Community Based Micro Finance mechanisms have been introduced to address the problem of financial services accessibility in Uganda. Community Based Savings Micro Finance initiatives provide savings and/or credit facilities to micro and small-scale business people who have experienced difficulties in obtaining such services from the formal Micro finance institutions and Commercial Banks. The members in the group are self- selected and they do not access any direct external financial assistance to their associations; instead they pool their money to create a fund from which members can borrow, (Ashe, 2012).

Busimbi Sub County village savings started the scheme with the major aim of providing loans to the people. It started with small amounts and was linked to savings such that the more a client saves the more she could borrow. The normal loan period for the savings schemes in Busimbi Sub County is four months and is repaid in 16 weekly installments. At the end of 2016, 95% of clients were covered by a benchmark sample of 71 NGOs and institutions engaged in village saving lending members. However to eliminate the need for collateral, village savings in Busimbi Sub County relies on variation of the solidarity lending methodology. It relies on a system of cross-guarantees, where each member of a village savings ensures the loan of every other member. Involvement in such developmental activities in the County is seen as a major strategy through which these lending members could improve on their economic and social statuses (Abu, 2011). Relatedly, the Uganda government on poverty eradication program report(2016), tried to diversify household income sources through Bonnabagagawale schemes, operational wealth creation, Naads programme, other agricultural NGO’s and joining other village saving groups (village VILLAGE SAVING SCHEMES). Despite all these strategies, many households in Busimbi Sub County still have inadequate or poor shelters, inadequate food supply,  poor health conditions, unemployment and  high drop outs due  to lack of school fees.

1.2 Problem Statement

Village savings is a microcredit methodology whereby financial services are administered locally rather than being centralized in a formal bank. Income generation groups in Uganda own livestock like cows, goats and sheep, poultry and other valuable assets like land, trading businesses, motor cycles, bicycles, motor vehicles. They also spend their individually earned incomes on the general consumption needs of the family, compared to their counterparts who do not earn any income. Involvement in the developmental activities in the County is seen as a major strategy through which these lending members could improve on their economic and social statuses (Abu, 2011). However according to the Uganda government on poverty eradication program report (2016), tried to diversify household incomes through Bonnabagagawale schemes, operational wealth creation, Naads programme, other agricultural NGO’s and joining other village saving groups (SACCOs). Despite all these strategies, many households in Busimbi Sub County still have inadequate or poor shelters, inadequate food supply,  poor health conditions, unemployment and  high drop outs due  to lack of school fees. This study therefore, was prompted the researcher to conduct further investigation on the effect of village savings schemes on eradication of house hold poverty in Busimbi Sub County Mityana district.

1.3 General Objective

To assess the effect of village Savings schemes on poverty eradication among the people in Busimbi Sub County Mityana district.

1.4 Specific Objectives

1. To establish the services in village savings schemes commonly supporting the people of Busimbi Sub County.
2. To establish the challenges being faced by village savings schemes beneficiaries in their struggle to eradicate poverty.

• To find out the different strategies to improve on savings cultures in Busimbi Sub county Mityana District

1.5 Research Questions

1. What are the types of village Savings Schemes commonly supporting the people of Busimbi Sub County?
2. What are the challenges faced by Community Based Savings Micro Finance beneficiaries in their quest for household income poverty eradication?

• What are the different strategies to improve on savings cultures in Busiimbi Sub county Mityana District

1.6 Scope of the Study

1.6.1 Subject scope

The study was based on the effect of village savings schemes on poverty eradication among the people in Busimbi Sub County Mityana district. The study focused on the services in village savings schemes, the challenges being faced by village savings schemes beneficiaries in their struggle to eradicate poverty and the different strategies to improve on savings cultures in Busiimbi Sub county Mityana District.

1.6.2 Time scope

The study considered a period of (2014-2017) and investigated the effect of village savings schemes on poverty eradication. The researcher based on these records to draw conclusions in the process of compiling a research report. Therefore the research was carried out from March to September (2017).

1.6.3 Geographical scope

The study was conducted in Busimbi Sub County, Mityana district. Mityana is bordered by Kiboga District to the north, Nakaseke and Wakiso districts to the east Mpigi, Butambala and Gomba districts to the south and Mubende District to the west. The district is about 45kms from Kampala and a two-hour drive from the city. In Busimbi Sub County has many savings schemes and these schemes are intended to eradicate poverty among the households. (Source)

1.7 Significance of the Study

The study will shade light on the contribution of the informal micro finance sector or village savings schemes towards household poverty eradication. The study will also contribute to the body of knowledge about the role of the informal micro finance sector to economic development.

The findings will help Policy makers to understand the contribution of community based savings schemes to household income poverty eradication. In addition, the findings will equip the policy
makers with concrete data that will enable them to advocate and influence policies governing credit accessibility among the poor households and community participation in community based development initiatives.

The study will also enable policy makers and mostly government to borrow a leaf from the contributions of informal micro finance institutions and see how to embrace them and integrate their approaches into the bigger projects of Poverty Eradication Action Plan (PEAP) and Plan for Modernization of Agriculture (PMA). This is because village savings is a key factor that can address issues that have long stood in the way of poverty eradication; and there can never be modern agriculture mostly in rural areas when it is not backed by increased income sources.

The findings will also contribute to the ongoing debate of how possible it is to achieve women’s empowerment through provision of savings schemes.  The findings will be helpful to the policy makers in drawing recommendations on the different ways of eradicating poverty in Uganda.

The study will widen the knowledge of the researcher about the contribution of savings schemes on poverty eradication in the country.

1.8 Definition of Key Concepts

Savings: The setting a side of available resources or income for future use. Savings can be in cash or in kind but for purposes of this study, savings is limited to cash.

Village Savings Scheme: An informal financial sector that has been created deliberately by self-mobilized and self-administered individuals or community groups who mobilize their savings at agreed intervals, and make them available and accessible to their members in form of credit Ashe (2012).

Poverty Eradication: An improvement in the economic conditions of the poor households by introducing them to a reliable source of income hence increasing their ability to demand and own productive assets, freely associate with others, secure a better livelihood and increase their standard of living in the short and long term.

Household: The family unit, with mother, father, children and other relatives who may be
within the house eating the same meal under the same roof or who just come for benefits.
Household Income Poverty:  Household Income poverty is a state when a household does not have access to money or other assets; they lack enough food or medicine and the have poor
clothes and houses.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This literature review provides the conceptual architecture and theoretical support for this research by grounding it on prior knowledge. It is an attempt to review the existing relative literature to the case study.

2.1 Services offered by Village saving schemes to its members in the society

According to Kyendo, (2011), over the years the village saving schemes have expanded their services and products to meet diverse needs and aspirations of the members. The Society being a member owned entity prides itself in being member focused so that the development of products and services are centered on the members needs.

According to Bailey, (2001), the most common form of products offered by Village saving schemes is savings. He notes that saving constitutes the key elements on which the development of the community depended. Local savings provide asset for the community’s investment in future. Without it, the community and the economy at large cannot grow and get out of poverty, unless the alternative sources of investment such as foreign capital from donors are injected in the community.

Davis & Worthington, (2005) note that Village saving schemes offers the widest variety of specialized savings products, including a savings program for women. The customers have a choice between immediately accessible, liquid products, or semi-liquid accounts or time deposits with accordingly higher interest rates. Customer orientation is also reflected in the fact that simple savings products are often offered alongside more complex products which allows customers to graduate as their demands change. Simple and clear design of basic savings products enables depositors to easily select the product that best suits their needs. In line with the above, Pelrine & Kabatalya, (2005) report that the simple and transparent design of the savings products also enables staff to administer them with ease, reducing administrative costs.

This is in line with Lipsey (1995) who reports that it is desirable that Village saving schemes’ membership embrace a saving culture so as to increase their low incomes, leading to improved quality of life.

Further still, development is induced by saving in that, high levels of saving led to capital accumulation, later on investment lead to high income levels, ultimately breaking through the vicious cycle of poverty, hence, development in the long run.

Kirkpatrick (2002) report that the other most common product offered throughout the village saving schemes fraternity is the Credit and Loan services. Many of the Institutions have no Institutional capacity or capital base to offer other services. Services are also offered mainly to members of the Village saving schemes. He further reports that members are entitled to the following loans: Development loans, School fees loans, Emergency loans, Rural / agricultural loans, Normal loans, Special loans, Welfare loans, Working capital loans and Capital development loans.

According to Pelrine et al., (2005), Village saving schemes also get involved in marketing of the products they sell for wider outreach. They sell their policies, social gatherings (funerals), promotion meetings, the church structure, women groups, local leaders and society meetings.

According to Mutekanga (1998), Village saving schemes provide financial services to their members through existing product or marketing societies. He further argues that members also have the opportunity of saving with their Village saving schemes through banking sections of the district cooperative unions, which maintain savings account for their members.

To Afroz, (2013) micro credit institutions make investments without approval from the Ministry of Finance, Planning and Economic Development. He notes that this has greatly removed bureaucracy from the day-to-day operations of the societies though it has increased the risk of making unsound investments. Already some Village saving schemes have suffered in the recent bank crisis.

Kyendo, (2011),  using  IV  and  Propensity  Score  Matching  (PSM),  found  that  the  effects of micro-loans are not robust across all groups of poor household borrowers; the poor participants are among those who benefit the most and the effect of participation is, in  general, stronger for male borrowers.

2.3 The challenges being faced by village savings schemes beneficiaries in their struggle to eradicate poverty.

The women who are the poorest of the poor are not always guaranteed of reducing poverty in the household because of their lack of decision-making abilities within the family. Men still control household resources and economic wealth. Some women are denied access to the financial services and they have no say on the family earnings even when they have contributed to it, Deugd, 2012 cited in Skartlatos (2014).

This raises a question “does access to financial services and increase in household income necessarily translate into poverty eradication among the households in village. Despite their vitality in helping the poor households to meet their social, economic and cultural needs, Community Based Savings Micro Finance mechanisms lack proper credit delivery mechanisms, financial and administrative systems to manage potential fraud at group level, which threatens sustainability of the Community Based Savings Micro Finance (CBSMFs) (Micro Save Africa, 2016).

A number of the informal financial systems are fraught with high risks of default and mismanagement of funds due to the absence of written records, rules and regulations and loan agreements. Consequently, short terms loans are given to the members; with limited repayment period ranging from one to three months. This puts a lot of pressure on the beneficiaries to generate adequate income to save and payback the loan within a short time, Wright & Mutesasira (2011).

Most likely, Community Based Savings Micro finance could be helping 90% the poor households to eradicate poverty. Apparently their contribution to poverty eradication seems not be evidently noticed and registered as a result little documentation has been done on their contribution to household poverty eradication. This limits adoption of the good practices, implementation of corrective measures to enrich the methodologies, as well as focusing specifically on improving the quality of services delivered to the beneficiaries, Skartlatos, (2014).

The literature reviewed gives an overview of poverty, both at international and national levels, the types Community Based Savings Micro finance, how they try to address the problem of poverty and challenge the Community Based Savings Micro finance s face as they address poverty issues. Unlike the formal micro finance sector, little was known about the informal micro finance services available, the category of beneficiaries, and how the benefits translated into household poverty eradication. Such issues were of great interest during this study, Micro Save Africa (2016).

The capital for the loans is provided with on-time weekly installment repayments collectively guaranteed by all members i.e., a shortfall by one member must be covered by other group members. This joint liability form of microcredit is controversial, with Muhammad Yunus (for example) rejecting formal systems of joint liability in Grameen Bank’s solidarity groups, (Johnson, 2011).

Market interest rates apply to village savings loans. At the end of 2016, the average portfolio yield for a sample 71 microfinance institutions engaged in village savings was 27.7%, after removing the effect of local inflation. The village savings itself will usually mark up this rate when it on-lends to individual members. While these rates seem high, they are low compared to those charged by local moneylenders in most countries. Unlike rural savings and credit unions these microfinance institutions do not provide savings services directly to their clients, Johnson (2011).

Worldwide FINCA’s 21 affiliates have about 3,300 staff, of which about 2,600 are field staff (credit officers and supervisors), and among these many are the better-educated children of FINCA clients. Each credit officer (CO) attends the weekly meeting of each of her 10-15 village savings to coach its leadership committee and monitor the bank’s activities, Saurina (2015).

In addition to motivation and adult education, the (CO) supervises client attendance, monitors bookkeeping accuracy, checks the accuracy of the current week’s loan and savings collections, and checks when the deposit receipt of the previous meeting. In turn, each village savings is managed by its elected officers a president (who leads the bank’s democratic decision-making process), secretary (who takes attendance and keeps minutes) and a treasurer (responsible for accurately handling all cash transactions). Finally, each village banker has her own passbook, and her recorded balances of loan payments and savings deposits must always be the same as those recorded in the treasurer’s record for each client, Saurina (2015).

Village Community Savings were initially started by women’s groups in Niger, West Africa as a means of empowering the groups’ members to manage their own funds. The concept was then successfully transferred to India and Bangladesh. In 2012, CARE started the first Village Community savings in Tanzania, Tuly (2014). Each Village Community savings is a group of 25-30 members from the same village. In the Kilimanjaro region, membership is not limited to women, but around 90% of the members are women. Most groups can be found in the rural parts of the Kilimanjaro region, where for people who cannot provide any collateral, access to a savings loan even of very minor amount is almost impossible, Morisset and Neda (2011).

The concept of the Village Community savings has three main advantages. Firstly, through access to credit, group members are able to invest in income-generating activities including agriculture, trading of goods, livestock, food stalls, and small manufacturing; and to get access to education. Secondly, empowerment: Due to regular meetings and training, members become empowered and commonly become active members of the community, known to take up leadership positions, Tuly (2014).

The system provides a safety net where by the insurance fund provides means for members to address immediate cash needs to meet health and social requirements. The basic concept of each Village Community savings is the same; there are only small differences in terms of the exact conditions for loans and membership rules and regulations (e.g. interest rates, minimum or maximum amount of shares etc.), which each Village Community savings defines itself in its constitution, Morisset and Neda (2011).

Each Village Community savings has two main funds – the savings fund and the insurance fund. For the savings fund, at every weekly meeting, each member has to pay a certain amount equivalent to one share. There is also a maximum of shares a member can buy. The member then has access to a loan with a maximum amount of 3 times his or her value of shares. Loans are only paid for investments of members into income-generating activities and for education purposes of members or their children, and need to be paid back typically within 3-6 months, Johnson (2011)).

There is a low interest rate set by the members of typically 10%. The interest collected is saved as a profit for the group. At the end of each 12-months cycle, the profit (coming from interest and fines) is paid out to the members as a dividend, according to their respective share. Each group of 30 members is divided into 6 sub-groups of 5 members each, which act as guarantors for each other. Any member applying for a loan has to prove to the 4 other members of his or her sub-group that the loan can be paid back, Nancy and Wells (2011).

The case and amount is discussed and decided during the group meeting. Money provided from the insurance fund also has to be paid back (typically within 1 month), but no interest is being charged. Village Community Savings don’t have any staff; all members are volunteers choosing amongst themselves who should carry the necessary positions. The chairperson is in charge of storing in his or her house the cashbox, which is a strong metal box. Its key is guarded by another person, the treasurer, who is in charge of keeping records of all financial transactions. Further roles include two money counters, and a discipline master or mistress controlling that the rules defined by the group’s constitution are being followed by all members. Inside the cash box there are 4 bags – one to put cash for the savings fund; one carrying the emergency fund’s cash; one with cash resulting from interests; and one for cash resulting from fines, Johnson (2011)).

Additionally, in Tanzania, Village Community Savings have been recognized by the government in 2012. They can register as CBO (Community-based organization) and with BRELA Tanzania as a company. When a new group is started; they are being trained by professionals of NGOs specializing in this subject area, such as FASO (Fumbuka Agro Solution Organization). The initial training takes place once per week, typically for duration of 1-3 months, Zhang (2011).

The NGO later regularly meets the group to monitor their activities. In the Kilimanjaro region of Tanzania, the concept proved successful and the number of Village Community Savings is constantly growing. Business activities started primarily include agriculture, trade, running small restaurants (in Tanzania called “Mama Ntilie”), and producing handcraft items. Matured groups often start projects as a group rather than as individual members, and get engaged in larger scale business activities. In the beginning of 2013, several NGOs specializing in supporting Village Community Savings were joining forces and started an alliance, allowing them to get access to international microcredit programs and get better conditions from conventional savings, Peterson (2013).

Volunteering internships will take place with FASO (Fumbuka Agro Solution Organization), a Moshi-based NGO founded by Innocent Mbele, a young graduate of Finance and Business Administration from Moshi. Together with 5 fellow members and other organizations engaging in the subject area of microfinance, he is training start-up groups and monitoring them. The main challenges faced included the transport costs for visiting the groups in the Kilimanjaro area (transport costs are not always met by the Vicoba groups), conflicts within the groups, and lack of commitment of certain groups or individual members, Balunywa (2015).

2.4 The different strategies to improve on savings cultures of village households

Population control measures through family planning programmes in order to reduce the dependent and encourage saving which can lead to increased capital accumulation and as a result high level of investment can be attained which creates employment opportunities to particularly disabled people hence rectifying the problem of poverty and it was according to the research done by John industrialist and philanthropist (2012).

Changing the education system. According to Paul (2013), the basic of economics urged that emphasis should be put on job creators even if they are disabled instead of job seekers such as training people on how to become entrepreneur where by those entrepreneurial skills help them to establish something on their own leading to the improved standard of living thus contributes to improved savings culture.

Diversification of economy. Johnson (2014) on corporate social responsibility, says that in order to reduce on over reliance on few sectors especially agricultural sector other sectors should be opened or promoted such as service business to help to create more opportunities for disabled people to benefit from it when their standard of living so as to enable people improve on their savings culture and this was also supported by Cole (2012) in his investment theory and practice.

Encouraging commercial production. In the research done by Shridge Management College (2014), substance production is reduced, more employment opportunities are created and as a result people generate more incomes which improves their standards of living particularly those ones with disability.

Credit facilities should be extended to people especially the disabled ones. People in rural areas should be given credit facilities to enable them uplift  their earnings and standards of living whereby they also start or initiate some businesses where they can generate more incomes as a solution to improving the savings culture, Wilson (2009).

Infrastructure development. Robbins (2010) investment for development emphasizes that the government should embark on building a strong and sound infrastructure like roads and health facilities which can stimulate investment leading to more employment opportunities and improved standards of living. Excellent primer on modern investment continues with the statement that infrastructures such as transport network, power supply should be developed in order to induce investment in a country like Uganda and improved savings culture.

Proper planning and implementation. Kamuntu (2015) observed that the government should carry out proper planning in order to allocate the available scarce resources efficiently and implement them with minimum wastage so as to uplift people’s earnings such as the disabled persons and improved standards of living thus the savings culture can be improved.

The technological development should be done through intensive research and innovations in order to promote efficiency in production which also uplifts people’s standards of living. He adds that encouraging local savings and investments. In order to reduce poverty people should develop the culture of savings especially the disabled people even if the salary is very small to enable them establish something productive, Wilson (2009).

In Uganda, various efforts were made by the government, non-governmental organizations and individuals to reduce poverty in the country. According to Ogwumike (2011) poverty alleviation measures implemented so far in Uganda focuses more attention on economic growth, basic needs and rural development strategies. The economic growth approach focuses attention on rapid economic growth as measured by the rate of growth in real per capita GDP or per capita national income, price stability and declining unemployment among others, which are to be attained through proper harmonization of monetary and fiscal policies.

The basic need approach focuses attention on the basic necessities of life such as food, health care, education, shelter, clothing, transport, water and sanitation, which could enable the poor live a decent life, where rural development approach focuses attention on the total emancipation and empowerment of the rural sector, Ijaiya (2012).

According to CARE International Report (2009), the leaders of the Village saving schemes  need to be carefully selected to ensure that they have sufficient literacy level to complete the necessary monitoring documents and ability to read and write. Village saving schemes are self- managing associations so it is necessary that the groups conduct proper monitoring in order to fully understand how much they are saving and lending and what problems may exist that need to be addressed. It was also stated that Village saving schemes should be linked with micro-finance institutions so that the members are able to borrow larger amounts. It would be beneficial to its members if an increased number of Village saving schemes are linked to micro-finance institutions so that Village saving schemes members are able to access larger loans from MFIs.

Katabarwa (2009). Recommends that since Village saving schemes are the best tool for household poverty eradication especially in rural areas, government should fund them to increase the loan amounts, increase the repayment period and improve the credit terms for the expeditious eradication of household poverty.  She also recommended that training of the members and regular financial advice will help the Village saving schemes to overcome the challenges being faced in their effort to eradicate poverty.

CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This chapter presents the detailed plan of how the study was conducted. It presents the study design, study population, sampling techniques, data sources, data collection methods, instruments, data processing, analysis and presentation, procedure of the study, limitation to the study and appendix.

3.1 Research Design

Descriptive research survey was used with the intension of obtaining both qualitative and quantitative aspect of data and to organize data in an effective and meaningful way. The design also helped the researcher to collect data from population and get the description of existing phenomena as it exists by asking individuals about their perceptions, attitudes, behaviours and values. The study employed both qualitative and quantitative research approach. This was because they supplement each other in that qualitative approaches provide in-depth explanations while quantitative approaches provide the hard data needed to meet required objectives. This method was chosen due to time limitation and inadequate resources which may not allow methods of research. Quantitative method approach involved a formal objective and systematic process in which numerical data was used to obtain and analyze information.

3.2 Study Population and composition

Cooper et.al (2013) states that population is the total collection of elements about which we make some inference. The researcher used a total population of 85 respondents including women entrepreneurs, Leaders of savings groups and Members of savings groups..

3.3 Sample Size

The study selected a sample of 70 participants out of 85 and to participate in the study.

Table 1: showing the composition of sample size your topic is on

3.4 Sampling technique

Purposive sampling method was used on leaders of savings groups who know the value of savings. This was done with the intension of obtaining quality information for the study. Simple Random sampling was used on members of savings group and Women entrepreneurs. Basing on this method, each respondent got an equal chance of being selected for sample.

3.5 Data source

The data was collected from the two major sources including primary and secondary data sources.

3.5.1 Primary data sources

The researcher obtained the first hand data directly from the respondents through questionnaires and interviews.

3.5.2 Secondary sources

The data was obtained from the operational manager’s report, performance reports, journals, magazines, newspapers and any other documents that were found relevant to the study.

3.6 Data collection instruments

3.6.1 Questionnaires

Quantitatively, the researcher used questionnaires to obtain the primary data. Closed ended questionnaire was drafted to collect primary data basing on the objectives of the study. The researcher distributed the questionnaires to Women entrepreneurs, Leaders of savings groups and Members of savings groups. The questionnaires were hand delivered to and collected later after filling them by the respondents for data analysis. Questionnaires were used because many respondents are likely to be literate and the time for them to read and exhaust most of the questions was enough hence the study used this research instrument effectively.

3.6.2 Interview

Qualitatively, the researcher used interviews to people who didn’t have time to answer the questionnaires. Using this method, the researcher gathered the relevant data through direct verbal interaction with the participants. The respondents got information verbally through face to face conversation.

3.7 Data presentation, processing and analysis

3.7.1 Data presentation

After editing, coding and analyzing data, tabulation was done which gave a clear presentation of the various responses and significance of each interpretation. Frequencies and percentages were used in tabulation which portrayed statistics used in analyzing and interpreting the findings of the study. Frequency tables, graphs and charts aided in presentation of the collected data which made it summarized and more understandable using statistical packages like Microsoft excel.

3.7.2 Data processing

The data was processed through editing, tabulating and coding. This helped the researcher check the completed responses with a purpose of detecting and eliminating errors and identifying vital information that was essential in coding and tabulation. This was done according to whether or not the response was in line with the objectives of the study and realistic to the subject matter. This involved mainly the use of simple statistical techniques like the use of tables, percentages which tested the significance of the information from which meaningful information was drawn.

3.7.3 Data analysis

Qualitative and quantitative data was obtained, coded, edited and categorized according to the research objectives. Researcher analyzed qualitative data using descriptive statistical analysis methods of frequency and percentage distribution and tabulation. Quantitative data was analyzed mathematically through arranging the responses from the different respondents which was summarized in tables, frequencies and percentages for the general analysis. The researcher edited the findings and presented them through MS Excel and made conclusions about the study.

3.8 Data validity and reliability

The study ensured validity and reliability of the data which was collected in different ways.

3.8.1 Validity of the data.

The researcher first designed the questionnaires and submitted them to the supervisor who examined and approved them for purpose of their validity. After the approval of the questionnaires, the researcher went ahead to carry out a pre-test pilot study and after pre-testing the tools, ambiguous questions was adjusted accordingly.

3.8.2 Reliability of the data.

Reliability refers to random error in measurement. It indicates the accuracy or precision of the measuring instrument (Norland, 2012). To establish the reliability of the instrument, a pilot study was carried out. Questionnaires were administered on the target population to check consistency of the instrument while testing reliability. The questions were pilot tested and retested in the study area which ensured the reliability of data that was collected.

3.9 Procedure of data collection.

The research proposal was first approved by the supervisor and then researcher designed the research instruments which were used in data collection activities with the help of the supervisor. The researcher got a letter from the coordinator of research school of Management and other officials in the study area which enabled her officially conduct the study in the areas with ease. This helped her in setting out the program for interviews, giving out and collecting questionnaires.

3.10 Limitations to the study

The researcher faced a problem of limited cooperation from the respondents and this was due to their own reasons among themselves being that they had limited time and interest in providing the information required. However, the researcher explained the purpose of the research and convinced them to participate in responding to the study.

The researcher faced a problem of limited time to carry out research fully.  However, this problem was solved by the researcher through getting enough time that enabled her carry out the research effectively.

Communicating to some target respondents was difficult due to cultural differences, language barriers and differences in behaviors which gave the researcher hard time. However, to ensure effective communication, the researcher used English language which at least every literate respondent comprehended and then local language for those with English limitation.

CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS

4.0 Introduction

This chapter mainly presents the findings from the study. The findings on the effect of village saving schemes on poverty eradication among people in Busimbi sub county, Mityana district. The findings of the researcher were acquired from 70 respondents. The researcher distributed questionnaires and all of them were returned. She also carried out personal interviews with the respondents.

 4.1 Background variables

The respondents’ gender, age, marital status and education level were treated as background variables of the study.

4.1.1 Gender of the respondents

The table below gives the details regarding the gender of the respondents;

Table 4.1: Gender of the respondents

Source: Primary data

From the findings of the study, it was revealed that majority (60%) of the respondents were males while their counterparts represented 4o% of the total responses. It is evident from the table above that a significant percentage of both sexes were represented implying that the study was not biased. This could have been because of the fact that village saving schemes are seen as the surest way of development since they help member to save at subsidized rates than the normal banking system.

4.1.2 Age of the respondents

The study also was interested to establish the age of the respondents and the figure below presents the responses;

Figure 4.1: Age of the respondents

Source: primary data

From the findings of the study, it was revealed that the bigger percentages (55.7%) of the respondents were aged between 25 and 35 years while 28.6% of the respondents were aged above 35 years of age and only 15.7% were less than 25 years. The above trend in participation advanced by the respondents is a valid one, this is attributed to the fact that elderly are exposed to village saving schemes more that the youth and this could also be because of the fact that they are aware of the importance of the village saving scheme model as they given the opportunity to save regularly with their village saving scheme.

4.1.3 Marital status of the respondents

The study was also interested in finding out the marital status of the respondents; figure below presents the details;

Figure 4.2: Marital status of the respondents

Source: Primary data

From the findings of the study, it was revealed that majority (85.7%) of the respondents were married while 14.3% of the respondents were single. This type of participation is valid, implying that the study was in position to meet the real people who were well grounded with the information.

4.1.4 Education level of the respondents

The study also captured data on the education level of the respondents, and table 4.2 below gives the details of the findings;

Table 4.2: Education level of the respondents

Source: Primary data

It was found out that majority of the respondents (52.9%) had reached up to secondary level of education while 22.9% of the respondents went up to primary level. 12.9% of the respondents were degree holders and 11.4% of the respondents were diploma holders.

From the interviews with the respondents, the study found out that all the employees from some saving schemes had bachelors and diploma holders, implying that organizations considers graduate employees to be very creative, knowledgeable and possessing expertise in various areas of banking and financial handling of members’ savings.

4.2 Services offered by village saving scheme to its members in the society

The first objective of the study was to assess the Services offered by village saving schemes to its members in the society and the responses were presented according to the study questionnaires.

4.2.1 Date of joining the village saving scheme by the respondents

The responses to how long the members had been saving with village saving scheme were summarized in table below;

Table 4.3: Date of joining the village saving scheme

Source: primary data

It was observed that most of the members (57.1%) joined village saving scheme for a period between two and five years while 22.9% of the respondents had been in the village saving scheme for over five years and lastly 20% of the respondents had joined village saving schemes for less than two years.

This implies that the greater percentage joined village saving schemes for a long period of time implying that the people of Busimbi comply with the government’s programmes such as prosperity for all scheme; which emphasizes financial services access through community based village saving schemes, and thus improving their savings culture and consequently development of the society.

4.2.2 Services Offered by the village saving scheme

The study captured data on the services offered by the village saving scheme, and table below presents the findings regarding the services offered by the village saving scheme;

Table 4.4: Services offered by village saving scheme

Source: primary data

From the findings of the study, it was revealed that majority (42.9%) mentioned savings custody as the major product offered by people’s cooperative village saving scheme.

35.7% of the respondents mentioned financial education and 21.4 mentioned loans. This implies that every potential member must purchase a minimum share as determined by the village saving scheme making each member an owner of the cooperative.

From the interview with the manager of one of the village saving schemes, it was revealed that once the share has been fully paid up, all other contributions will go towards savings and the any members who wish to get a loan, the village saving scheme considers his share capital to determine the amount that he/she qualifies for in loans.

This finding is valid, implying that getting a loan from the village saving scheme is fast. What is required is that members are encouraged to save toward loans. Loans are ratio based on member’s savings and shares.

4.2.3 Requirements for getting a loan

The responses to requirements for getting a loan were summarised and the findings are as presented in the figure below;

Figure 4.3: Requirements for getting a loan

Source: primary data

From the findings of the study, it was found out that majority (41.4%) of the respondents suggested that getting a loan from the village saving scheme requires one to be a member of the group which leads to the second requirement as shares (35.7%).

In some instances 12.9% of the respondents suggested that one has present a land Purchase/ownership agreement and lastly 10% of the respondents mentioned a minimum of 2 guarantors as a requirement for getting a loan. This implies that individuals who have established their credit worthiness through regular savings and are able to show ability to repay a loan can earn the privilege of borrowing these savings in the form of a loan without any collateral.

4.2.4 Whether living standard has improved after joining the village saving scheme

The following table has been summarised from the responses received from the field regarding whether living standard has improved after joining the village saving scheme

Table 4.5: Whether living standard has improved after joining the village saving scheme

Source: Primary data

From the findings of the study, it was revealed that majority of the respondents (85.7%) of the respondents strongly agreed that their household income levels had improved after joining the village saving scheme and only 14.3% of the respondents did not agree. This implies that credit facilities are essential to the Village saving scheme members.

It was also revealed that majority (90%) of the respondents strongly subscribed to the view that village saving scheme has helped to improve their household savings culture ever since they joined the village saving scheme and only a smaller percentage (10%) suggested that their household savings culture had not changed. This implies that financial services in the form of savings products, loan products and financial education help members to aim at improving savings which lead to capital accumulation leading high incomes and improve quality of members’ lives.

From the findings of the study further, it was revealed that majority of the respondents (71.4%) mentioned that their household education levels had improved after joining the village saving scheme and 28.6% of the respondents’ household education levels had not improved. This implies that education level of the borrower was significant in credit acquisition given that from the interviews conducted, it was revealed that members save for various purposes including getting school fees of their children.

The findings of the study further revealed that majority (70%) mentioned that their household health services had improved after joining the village saving scheme, while 30% did not subscribe to the view. the finding suggests that village saving schemes provide institutional development in area where the formal bank cannot reach.

4.3 Challenges affecting village saving schemes in the society

The third objective of the study was to establish the Challenges affecting village saving schemes in the society. The study set the following study attributes to achieve the purpose of this study objective.

Table 4.6: Challenges affecting village saving schemes in the society

Source: Primary data

Respondents were asked whether in their own view, whether there were challenges affecting their village saving scheme. To this, there was unanimous agreement among respondents of existence of the challenges affecting village saving schemes in the society. Majority (38.6%) of the respondents suggested poor savings culture among the locals as the major challenge while 24.3% of the respondents suggested multiple borrowing which leads to high default rates. 20% of the respondents mentioned Taxation of members interests which discourages members and 17.1% of the respondents mentioned lack of proper regulations for village saving schemes which causes challenges in loan recovery process. This implies that access to the required loan money for most clients was not a problem, but rather proper usage of the loan funds, poor savings culture and high default rates high interest rates.

4.4 Strategies to overcome the challenges affecting village saving schemes in the society

The last objective of the study sought to establish the strategies to overcome the challenges affecting village saving schemes in the society, the responses were summarized and they are as presented in the table below;

Table 4.7: Strategies to overcome the challenges affecting village saving schemes

Source: Primary data

From the findings of the study, it was revealed that majority (48.6%) of the respondents suggested that the major strategy to overcome the challenges affecting Village saving schemes is to enforce Capacity building training for village saving scheme’s members, staff and board to enable them deliver financial service effectively while 35.7% of the respondents mentioned embracing of management information systems and software for accounting and loans management and 15.7% of the respondents mentioned institution of village saving scheme regulatory body and laws other than the cooperative statute.

CHAPTER FIVE

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter presents the discussions of the study, conclusions and recommendations which are in line with the objectives of the study.

5.2 Discussions

5.2.1 Services Offered by village saving schemes

Findings indicated that savings custody was the major product offered by village saving schemes. Other products included loans, shares, quick/emergence loans as well as financial education. This therefore justifies the objective of the study. These findings are in agreement with the work of various authors and publications, For instance,

Bailey, (2001) earlier reported that the most common form of products offered by village saving schemes is savings. He earlier noted that saving constitutes the key elements on which the development of the community depended.

Furthermore, in the documents produced by Kirkpatrick (2002) it was reported that the other most common product offered throughout the village saving scheme fraternity is the Credit and Loan services. In line with this, Mutekanga (1998) also reported that village saving schemes provide financial services to their members through existing product or marketing societies, thus this confirms Pelrine and Katabalya (2007) findings that village saving schemes indeed have a great impact on the level of the savings culture.

Davis & Worthington, (2005) also earlier noted that village saving schemes offers the widest variety of specialized savings products, including a savings program for women. He also suggested customers have a choice between immediately accessible, liquid products, or semi-liquid accounts or time deposits with accordingly higher interest rates.

5.2.2 Challenges affecting village saving schemes in the society

The findings on the challenges affecting village saving schemes in the society indicated that the major challenge was poor savings culture among the locals. Other stressing challenges were multiple borrowing which leads to high default rates, Taxation of members’ interests which discourages members and lack of proper regulations for village saving schemes which causes challenges in loan recovery process.

The above findings confirms the works of earlier researchers for instance, Balassa (1989) earlier reported that financial institutions experience a wide range of problems partly owing to the fact that they target low income earners and have to establish a balance between serving them adequately and also meeting their operation costs.

Fred (2007) also reported that most village saving schemes either have no loan policy and procedures or what exists is not very clear and comprehensive. There are cases where loan-aging analysis is hardly practiced, there are no provision for loan write offs and losses.

5.2.3 Strategies to overcome the challenges affecting village saving schemes

From the analyses and presentations in chapter four, it was established that there were varied range of strategies mentioned by the respondents. The findings established that that the major strategy to overcome the challenges affecting Village saving schemes is to enforce Capacity building training for village saving scheme’s members, staff and board to enable them deliver financial service effectively. Other strategies included; embracing of management information systems and software for accounting and loans management and institution of village saving scheme regulatory body and laws other than the cooperative statute. These strategies are in agreement with Wahid (2008) who earlier reported that one of the objectives of village saving schemes is to promote a saving culture amongst their members since savings has a close relationship with wealth. Higher rates of saving, lead to faster accumulation of wealth and, the wealthier a nation was, the higher its standard of living (S.O.L) in the future.

5.3 Conclusion

On the Services Offered by the village saving schemes, the research findings concluded that the major products offered by village saving schemes were; savings custody, loans and financial education. It can be concluded that village saving scheme loans have played a significant strategic role in providing the bulk of capital used by members to meet their needs such as education, business start-up and other ventures that require quick funding.

The research findings also concluded that the major challenge was poor savings culture among the locals. Other stressing challenges were multiple borrowing which leads to high default rates, Taxation of members’ interests which discourages members and lack of proper regulations for village saving schemes which causes challenges in loan recovery process.

On the strategies to overcome the challenges affecting village saving schemes, the study findings concluded that the major strategy to overcome the challenges affecting Village saving schemes is to enforce Capacity building training for village saving scheme’s members, staff and board to enable them deliver financial service effectively.

5.4 Recommendations

The following recommendations were made as regard the findings of the study;

The study recommends that the village saving scheme management should encourage its members to deposit daily part of profits/incomes that they earn in their personal savings accounts with the village saving scheme as this would help them to improve their savings culture.

The study further recommends the government and other stakeholders should organize training of the people on proper ways of saving and usage of the loan obtained from the village saving scheme. This would help in mounding their expenditure habits especially discouraging them from spending their incomes extravagantly and thus improving the savings culture.

Savings and credit cooperatives should employ highly trained staff who can do the monitoring evaluation of the utilization of the loan. And also to train, educate and sensitize the members on short-term investment and other business portfolios.

The study also recommends that village saving scheme management should encourage its members to start income generating activities. This will help them to accumulate enough incomes for consumption and savings since the business activity set up will act as a sources of savings.

5.5 Area for further research

Further research should be taken on the impact of microcredit on agricultural production and productivity in Busimbi Sub County.

REFERENCES

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Ashe, J. R. (2012). An investigation into the Investment Practices of Reserve Funds in SACCO societies in Nairobi. MBA University of Nairobi.

Bailey, K. E. (2001). Presented at the 3rd Pan- Africa Consultative Forum on Corporate Governance, Dakar: Senegal.

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Chambers, T. (15). Applying International Best Practices to South Africa’s SACCOs: World Bank Working Paper No. 56.

Cole, M.M. (2007). Financial Markets and Institutions: An Introduction to a Risk Management Approach. 3rd Ed. New Delhi: Tata McGraw-Hill Publishing Company.

Davis, P. & Worthington, S. (2005).Continuity in Capital Accumulation the Case of the British Cooperative Bank. Journal of Business ethics, 12(1), 849-859

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APPENDICES

APPENDIX I: QUESTIONNAIRE FOR THE RESPONDENTS

Dear respondent,

I am NASSAKA CLAIRE STELLA pursuing a Bachelor of Management Science of Kyambogo University. I am conducting a study on “the effect of village savings schemes on poverty eradication, a case study of Busiimbi Subcounty Mityana district”. You are kindly requested to participate in this study by filling in the questionnaire so as to help me complete the program. The information provided will be purely for academic purposes and will be treated with a lot of confidentiality. Your cooperation will be highly appreciated.

 SECTION A: Bio data

1. Gender
2. a) Male                     b) Female
3. Age

a). Less than 25years                b). Between 25 and 35years                  c.) Above 35years

3. Marital status
4. a) Married b) Single
5. Education level

Primary              Secondary                Diploma               Degree                    None

SECTION B: Research Data

Objective 1: Services offered by village savings schemes

5. For how long have you been saving with this village savings schemes?
6. a) Less than two years b) Between two to five years c) Above Five years
7. What services does this village savings schemes offer?
8. Loans b) Financial knowledge                      c)  Saving
9. Others (Please specify)………………………………………………………………..
10. Have you ever gotten a loan from this village savings schemes?
11. a) Yes                                          b) No
12. If yes, what are the requirements for getting a loan?
13. Land title
14. Membership
15. House
16. Other (please specify)…………………………………………………………………
17. Ever since you became a member of this village savings schemes, has the living standard improved under the following indicators?

Objective 2: Challenges affecting village saving schemes in the society

12. Does this village savings schemes face any challenges?

a). Yes                                     b). No

13. If yes, what challenges affect Village saving schemes in this area?

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

Objective 3: Strategies to overcome the challenges affecting Village saving schemes in the society

14. Are you satisfied with the level of savings in this village savings schemes?
15. a) Yes                                          b) No
16. If, yes state the strategies used by this village savings schemes to mobilize savings

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

16. In your own opinion what possible strategies can be adopted to solve the challenges faced by Village saving schemes?

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

Thank you so much for your cooperation

APPENDIX II: INTERVIEW GUIDE FOR THE RESPONDENTS

Dear respondent,

I am NASSAKA CLAIRE STELLA pursuing a Bachelor of Management Science of Kyambogo University. I am conducting a study on “the effect of village savings schemes on poverty eradication, a case study of Busiimbi Subcounty Mityana district”. You are kindly requested to participate in this study by filling in the questionnaire so as to help me complete the program. The information provided will be purely for academic purposes and will be treated with a lot of confidentiality. Your cooperation will be highly appreciated.

1. For how long have you been saving with this village savings schemes?
2. What services does this village savings schemes offer?
3. Has the living standard of the people improved after joining the village savings schemes?
4. Were you saving before you joined this village savings schemes?
5. What strategies are used by this village savings schemes to mobilize savings of the members?
6. What challenges affect development of village savings schemes’ industry in this area?
7. How do you cope with the challenges affecting the member’s savings culture of this village savings schemes?

Thank you so much for your cooperation