Transaction costs and outreach of microfinance institutions in Uganda

Abstract

Issues in Business Management and Economics
Vol.1 (6), pp. 125-132, October 2013
ISSN 2350-157X
Article ID BM045, 008 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

Transaction costs and outreach of microfinance institutions in Uganda

Accepted 7 October, 2013

Bazinzi Natamba*, Mangeni Peter, 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
Tel.: +256782170980

 Abstract

Microfinance institutions (MFIs) world over have been identified as critical institutions to nations’ quest for solutions to their development challenges. The microfinance industry, which over the past years came under pressure to fill the poverty gap and become self-sustaining, has to some respect succeeded in doing so. In Uganda, several microfinance institutions have set foot in the past decade. However, their outreach programs are still unnoticed. This study was undertaken as a result of the low outreach of MFIs, leaving some sections of Ugandans not in reach of microfinance services. The fact that these institutions are formed to fight poverty through outreach to the poor populations, their effect is expected to be much higher than what it is today. A quantitative research design was used in this study. Data were gathered using a questionnaire from 286 respondents that were purposively selected from 30 microfinance institutions operating in Eastern Uganda. These included; managers, credit administrators, supervisors, loan officers, product heads and clients. The data were coded and analyzed using descriptive statistics, correlation and regression analysis methods. The findings indicate that there is a significant positive relationship between transaction costs of MFIs and outreach (r=.525, p<.05). Findings further indicate that MFIs are incurring high transaction costs to serve clients. This in turn affects their abilities to reach clients.

Key words: Transaction costs, microfinance, outreach, Uganda

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