Research consultancy
THE EFFECT OF VILLAGE SAVINGS AND LOANS ASSOCIATIONS ON ECONOMIC EMPOWERMENT OF RURAL WOMEN IN LIRA DISTRICT NORTHERN UGANDA
CHAPTER ONE
INTRODUCTION
1.0 Introduction
This chapter contains background of the study, statement of the problem, purpose of the study, research objectives and questions, scope of the study, significance of the study and summary of the research.
1.1 Background of the Study
Throughout the time, all around the world, households have saved as insurance against emergencies, for social and religious obligations for investments and for future consumption (Rutherford, 1999). Saving ought to have started before the birth of Jesus Christ in the Roman Empire. It adventure is very much linked with the origin of money where merchants used to keep (save) their precious metals with the gold smiths who would give them back their gold when they are back after their business,(Cox, 1996).
A study revealed by Bailey’s (2001) states that saving is the key benefit that a member gets from the organization because a member is enabled to get a loan. Savings and Credit Cooperatives (SACCOs) being established by micro-business in the rural areas and urban areas have raised the standard of living for the people, provision of financial services to all vulnerable groups including women, the youth and the disabled. This has helped to elevate their status in society through economic and social empowerment, capacity building for SACCO members and staff through awareness and training on various skills like leadership and management skills, record keeping, importance of savings, management of micro-projects and basic financial management, inculcation of culture of savings in the lives of people and discouraging non-productive expenditures.(Cox,1996) It is source of direct employment for the members and staff of the SACCO and indirectly impacting the lives of many households who depend on the members and staff of the SACCO. Many rural micro projects such as restaurants, taxis, salons, handicrafts, shops and kiosks have been started from the loans taken by members of SACCOs.(Evans,2002) SACCOs have enabled the savers to acquire the capacity to build low cost, yet high quality, housing units, and to buy vital household item, and put their children through affordable school system and SACCOS have enabled members to put some of their loans in agricultural development thereby increasing the productivity in the agricultural sector and enhancing food security (Evans, 2002).
SACCOs role is to promote economic interest of their members and in particular to promote thrift among its members by affording them an opportunity for accumulating savings and paying reasonable interest without risk on such savings(Kabuga and Batarinyebwa)SACCOs Create source of funds from which it can afford relief to its members in need by making loans to them for productive and provident purposes are fair and reasonable rates of interest and with easy terms or repayment, continuously educate members on how savings can be made on regular basis and the wise use their savings; and provide service to its members such as financial counseling so that the members can solve most of their financial problems, and the risk of management service to ensure the safety of members’ savings and loans(Ssemogerere,2005). To fight poverty through improving the members’ economic and social conditions by enabling the access financial services, to fight exploitation of powerless individuals by the powerful individuals or institutions, by polling their own resources to meet their needs. Formation of a SACCO has the following benefits to members: members are encouraged to save since SACCOs are readily accessible, interest rates on saving and lending is better than elsewhere a fact that sound idealistic, members are taught how to handle their finances in a responsible manner this could be true only when they effectively and economically patronize their SACCOs. Loans are insured, so if a member dies, the outstanding balance is settled. However, it is not the practice across board. Besides; other MFIs also do insure loans for their clients. Savings are mobilized. It also encourages regular social interaction between members (Kabuga and Batarinyebwa, 1995).
Savings and Credit Cooperatives (SACCOs) in Africa are intended to offer an alternative to improving the desirable situation in low income countries. SACCOs are community membership based financial institutions that are formed and owned by their members in promotion of their members economic interests.(kabeer,2001)
The performance of the SACCOs industry in Uganda has so far revealed mixed economic trends although on the whole it has indicated promising results. Studies conducted on the industry show that there has been an increase in number of SACCOs outlets.Despite the above facts and statistics, it is clear that the SACCO industry in Uganda is still in its infancy. Banks still dominate the financial sector as shown by the number of total clients and the number of savings accounts. Unfortunately banks are still concentrated in urban centers. SACCOs associations still have a long way in building their client base, their savings and loan portfolios. SACCOs have by far the biggest potential to gain ground and capture the sector. These recognized the need for better access to small enterprises for small holders as key catalyst for enhancing production, competitiveness and incomes (Mugwanya et al,2004).
According to Manyara,(2003),Recognizing the importance of savings mobilization for the development of a nation, the study will find out why SACCO members do not have savings facilities and no confidence with their SACCOs for the socio economic effects on their savings mobilization; SACCOs have no effective savings mobilization strategies and are unable to outreach members; SACCOs have no regulatory mechanism to develop enforcement of prudential standards and enhance safety and soundness of members’ funds and are unable to meet the growing demand for loans and yet they are potential savers;(Champo,2008) there are no financial strategies put in place for the members’ savings mobilization and no member training on savings mobilization; there are no strategies for evaluating investment opportunities for members’ savings mobilization; the study also would like to verify whether the products that SACCOs offer will be able to boost productivity for their own development and the nation at large; how the marginal savings will be mobilized and made more beneficial for the urban sector in general and for the development of the economy in particular; and how immediate will fringe benefits from savings be introduced and be made appreciable to the potential savers, and how cooperative strategies and conditions through which Women savings will be tapped by the formal sector.
1.2. Statement of the Problem
Despite the fact that there is wide spread of village savings in and around lira district whose main aim is to stimulate Women Welfare, sustainable economic growth of micro entrepreneurs through provision of financial loans and non financial services (MOF report, July 2008).Many Women complain about no effective savings mobilization strategies and are unable to outreach members; village savings have no regulatory mechanism to develop enforcement of prudential standards and enhance safety and soundness of members’ funds and are unable to meet the growing demand for loans and yet they are potential savers; there are no financial strategies put in place for the members’ savings mobilization and no member training on savings mobilization; there are no strategies for evaluating investment opportunities for members’ savings mobilization,(Morduch, 2005). It therefore calls for research to find The effect of village savings and loans associations on economic empowerment of rural women in lira district northern Uganda.
1.3Purpose of the study
The purpose of the study is to examine the effect of village savings and loans associations on economic empowerment of rural women in lira district northern Uganda.
1.4 Research objectives
- To examine the different types of services that savings and loan associations offer to Women in Lira district Nothern Uganda.
- To establish the effects of village savings to women of Lira district.
1.5 Research questions
- What are the different types of services that savings and loan associations offer to Women in Lira district Nothern Uganda?
- What are the effects of village savings to women of Lira district?
- What are the challenges, hindrances and barriers faced by Women in accessing Loan services?
1.6 Scope of the study
1.6.1 Geographical scope
The study will be carried out Lira district Northern Uganda.
1.6.2 Content scope
The researcher will specifically look at the different types of services that savings and loan associations offer to Women in Lira district Nothern Uganda and the effects of village savings to women of Lira district and the challenges, hindrances and barriers faced by Women in accessing Loan services.
1.6.3 Time Scope
The study will cover a period of 6 months.
1.7 Significance of the study
- Government: With the research completed, the findings will enable the government set up policies governing the microfinance institutions towards the microcredit lending systems. And policies that will greatly encourage fair distribution of resources in the savings and credit cooperatives if better results are to obtained.
ii. Women: This research when completed, women will be able to find out about their continued empowerment by Villages savings and loans, challenges associated and their efforts in overcoming the challenges.
- Management:The study findings will be beneficial to Management to acknowledge different products of Village savings and suggest ways that require improvement.
