A comparative study on the uptake of outreach programmes, transaction costs and financial literacy by microfinance institutions in Uganda

Abstract

Issues in Business Management and Economics
Vol.1 (6), pp. 142-147, October 2013
Article ID BM046, 006 pages
Copyright © 2014 Author(s) retain the copyright of this article. Author(s) agree that this article remain permanently open access under the terms of the Creative Commons Attribution License 3.0 International License

Original Research Paper

A comparative study on the uptake of outreach programmes, transaction costs and financial literacy by microfinance institutions in Uganda

Accepted 7 October,2013

Bazinzi Natamba*, Nakabuye Zulaika, Brendah Akankunda and Agasha Esther

Makerere University Business School, Faculty of Commerce, P.O. Box 1337,Kampala, Uganda.

*Corresponding Author. E-Mail: bnatamba@mubs.ac.ug
Telephone: +256782170980

 Abstract

This study was undertaken to examine the relationship between financial literacy and transaction costs incurred by MFIs; to examine the relationship between financial literacy and outreach of MFIs; and to examine the relationship between transaction costs and outreach of MFIs. Clients of the MFIs participated in this study. Besides, the study took a cross-sectional research design and quantitative research paradigm. Correlation was conducted to assess the level of association between the variables under the study. Results indicated a significant positive relationship between financial literacy of clients and the transaction costs of MFIs (r= .182, p>.05). It was also observed that financial knowledge, financial skills and financial actions are not strongly related to outreach of MFIs (r=.0.85, P>05). Results also indicate that transaction costs of MFIs have a significant relationship with their outreach (r=.525, p<.05).Findings indicate that MFIs are incurring high transaction costs to serve clients; this in turn is affecting their abilities to reach clients. The main conclusion that could be drawn from the above findings is that MFIs have not fully put into place measures to increase the financial literacy of their potential and current clients which will in the long run reduce on the transaction costs incurred. Arising from the above observations, the following recommendations were made; It is suggested that MFIs come up with village groups techniques, MFIs also need to team up with other development partners like the government and come up with financial literacy training programs for clients, and MFIs also need to increase on the group sizes and cover further areas as this will enable them to increase on their breadth, depth and number of clients.

Key words: Transaction costs, outreach, financial literacy, microfinance institutions,Uganda

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