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IMPACT OF MICRO- FINANCE LOANS ON THE GROWTH OF SMALL & MEDIUM
SIZE ENTERPRISES (SMEs) IN SOUTH SUDAN:
A CASE STUDY OF KICK START SAVINGS AND CREDIT COOPERATIVE
JUBA CITY, SOUTH SUDAN.
BY
ATITI JACKLINE
BB(ACCOUNTING AND FINANCE)
A RESEARCH REPORT SUBMITTED TO THE
DIRECTOR OF RESEACH FOR PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF BACHELOR DEGREE IN BUSINESS
ADMINISTRATION IN ACCOUNTING AND FINANCE OF MAKERERE
UNIVERSITY KAMPALA(UGANDA)
DECLARATION
I Atiti Jackline, declare that this research report is my original work and that it has never been
presented for a degree award at any other university.
Signature: ………………………………………………
Atiti Jackline.
Date: ………………………………………………….
APPROVAL
Signature: …………………………………
……………………………………………
Name of the supervisor
…………………………………………..
Title of the Supervisor
Date: ……………………………………..
This research report has been submitted for examination with my approval in partial fulfillment
of the requirement for the award of a Bachelor Degree in Accounting and finance of Makerere
University.
DEDICATION
I dedicated this simple yet valuable piece of work to my beloved Dad VICTOR ONJE and my sweet mum SARAH ONJE, my lovely sisters Aguli Elizabeth, Lina Konyo, Rosy Samia, Susan Nunu, Ndio Winnie and my helpful brothers, Gita John, Salah Nalson, Bati Nyamiri, Yango, Siliy Julius, Ayiko Gideon and not forgetting my Sweetee Hassen Desire and my sweet baby Gloria for having supported me in academic up to this far, and to all my friends for their encouragment.
ACKNOWLEDEMENT
I here by extent my heartfelt and gratitud to the almighty GOD for havinh seen me through the Dissertation and making it successful for foregone conclusion. In the manner, I humbly extent my
vote of thanks to the aministration of Makerere Univeristy for having given us this opportunity to carry out this exercise.
ABSTRACT
The research was about the impact of micro-finance loans on the growth of small and medium
enterprises in south sudan.
The objectives of research were:
The examine the challenges that face SMEs in assessing micro-finance loans.
To fine out the contribution of loans to the development of SMEs
The research used both secondary and primary data. primary data was collected uing
questionnaries and interviews while secondary was collected through the use of documenttary
review the is, extracting data from textbooks journals and already existing research reports.
The research questionnaire based on the topic and issued it to the respondents to fill and
collected them later.
The rearch used data control mehtods for reguler checks to avoid chances of double counting. editing was done on contnuous base to ensure accuracy, uniformity and compleneness. codes were assigned to the respondents to make analyis and tabulations. then the data collected was then entered into a computer package called microsoft excel for easy analyis and interpreptation.The rsearch also used graphs to present information in a wwy it is easy to interpret undrstand and interestingly looked at.The research found out that SMEs, faced legal frame work in South Sudan for their attempt to assessMicro-finance loans. This was evidenced in table 32 where by 31.3% of the respondents disclosed that they faced problems in getting passports to present to the government for the loans processsing. The SMEs faced limited services by micro-finance institutions as given in table 32. Micro-finance institutons require considered people who were located near their premises for easy montoring. Lack of gurantee had also been a big problem to SMEs to assess loans. Micro-finance institution rquired guatantee for an individul to be given a loan.The research found out the following challenges that faced Microfinance institutions in their attempt to operate in south sudan. Failures to meet the deadlines by thier clients as dicloseed 62.7% by the respondents. This created problems on running the business.Another challenge was high level of illiteracy which affected the operation of Mirrofinance institutions in south sudan as discoseed by 20% otf the respondents. This created inefficiency in the operation.The ongoing demolition of the market created problems in getting more customers for the product.The research also found out that the microfinace instituions contributed the following to the development of SMES. The MFIs extented loans for the development of SMEs as reflected by 88.9% of the respondants. This loans helped the SMEs to start up their business and keep it growing. SMEs also gave training to the clients as disclosed by 11.1% of the respondents.This
training was given so that the clients do not make losses in their business and hence would be able to pay the loans in time.Mirofinance is more like assets to the developing countries. The services the give to thr clients tailoured to meet the needs and aspirations of local people and emphasess towords poor and growth of SMEsHowever the majority of microfinance in soith sudan faced with several challenges which may include the following failures to meet repayment deadline, scarcity of skilled labour due to competition and lack of legal frame work among others. This challenges if left to continue will only lead to down fall of microfinanceOn the other hand clients are faced with a number challenges ranging from security , failure to meet criteria ,poor infrastrures and kwoledge of FSSL services. The survey however conclude that despite the numerous challenges facing both FSSL and microfinance the remain with postive contribution towards SME
I therefore recomend micro finance institutions to give more effort in finacing SMEs for their role to be felt. Likewise, SMEs themselves should be receptive of few finacing ideas of the
SMEs and be prepared to make finacial commitments to ensure growth. Guidlines should also be put for MEIs to finace SMEs and lastly,it is the researcher's suggession that MFIs should find the
will and researchers to contribute to the development of SMEs The researcher suggested that future research should be directed to finding out the courage of microfinace institutions in south sudan.
CHAPTER ONE
Micro-finance loans refers to debt evidenced by a note which specifies among other things the principles amount interest rates and thew date of repaymet on the other hand growth refers to the increase in the amount of goods and services produced by an economy over time. the study aims at finding out the contribution of the micro-finance loans to the growth of the small and medium size enterprises in South Sudan. The charpter of the back ground of the study. The's Athieno (2011) Find out that many LDCs adopt a definition of SFMs that covers all firms that have employees below 250. Therefore, this includs the micro-firms. under this definition the majority of all business in develop countries are considered as SEMs cubing 2012. This charpter cotains the statment of the problem, objectives of the study research questions the scope of the study and finally the significances of the study.
1.1 Background to the study
Small businesses are generally regarded as the driving force of economic growth, job creation,
and poverty reduction in developing countries. They have been the means through which
accelerated growth and rapid industrialization have been achieved and political development
catalysts in both developed and developing economies. Mwangi(2011).Maalu, et. al. (2005)
discussed the role of Micro and Small Enterprises in the economy and noted the important role it
has played and continues to play.
In addition to the employment creation and income generation, the study noted other important
roles in the economy such as production of goods and services and development of skills. A
study by African Development bank group (2012) on the impact of micro finance services on the
growth of SMEs in South Sudan found a strong positive relationship between micro finance
services and growth of SMEs. The South Sudan Government’commitment to foster the growth of
MSEs emerged as one of the key strategies in 2005 after the signing of CPA( Comprehensive
peace Agreement) between Government in Khartoum and Juba. It was reinforced as a priority in
2012-2014 Interim Country Strategy Paper (ICSP) for the Republic of South Sudan (RoSS) for
the period 2012-2014following the country’s independence on 9 July 2011 and it subsequent
official admission as member of the Bank Group on 1 June 201 in Arushareport, a document that
set out the mechanisms for removing constraints to growth of MSE sector in the country.
In 2012, the government published the MSE policy report. This report was reviewed in 2002,
leading to a new policy framework that provides a balanced focus to MSE development in line
with the national goals of fostering growth, employment creation, income generation, poverty
reduction and industrialization.(Kenya Agency for the Development of Enterprises and
technology (2005). Vision 2030 had also emphasized the importance of Micro and
SmallEnterprises in Kenya. Micro and Small Enterprises are noted as a crucial catalyst
foachieving the vision 2030.
1.1.1 Growth of Small Medium Enterprises
One of the most important themes that come up in discussions about business is thesubject of
growth. Majority of studies on growth have been undertaken based on the law of Proportionate
Effects or Gibrat’s law. Gibrat’s law states that firm growth rate isindependent of firm size. The
studies have therefore categorized businesses into three categories: small, medium and large
enterprises. The available studies on growth have also used varied metrics to measure growth.
Howard (2006) laid out a frameworkdescribing how businesses grow. While he identifies seven
stages of organizationagrowth, the first three stages are of particular importance and interest to
small businesses Howard (2001). The first stage is that of new venture, which is when a small
business isjust beginning. Markets and products are being developed in this stage. The second
stageis expansion and can focus on increased sales, revenues, market share, and ultimately
thenumber of employees. Howard,( 2006). The third stage is professionalization, andfocuses on
formalizing the goals, processes and functions of the organization and isconsidered to be closely
related to expansion. Howard,( 2001). Stage four isconsolidation, and focuses on issues faced by
firms once they have made the transition toprofessionally managed organizations with working
systems in place, focusing more onmanaging its corporate culture. Diversification is the fifth
phase, focusing on developingnew products for markets for which the organization is already
providing goods andservices. The sixth stage is integration, focusing on developing an
infrastructure tosupport multiple business units. The final stage is that of decline and
revitalization andfocuses on rebuilding the organization at all levels, to ensure continued
survival. Howard (2006).Business growth is typically defined and measured using absolute or
relative changes insales, assets, employment, productivity, profits and profit margins. Therefore,
salesgrowth need not correspond to or underpin other dimensions of growth in which
policymakers might also be interested; for instance, sales can increase while employment and/or
profits fall. This is partly related to contextual or structural issues such as sector or age of
business but also to the strategic choices made by principal decision makers in thefirm. Sales and
/or employment growth is a better measure of new and small businessperformance than
accounting based measures such as profits, return on investment ormarket share. Sales dates are
usually readily available and business owners themselvesattach high importance to sales as an
indicator of business performance. In practice, salesgrowth is also easier compared with some
other indices and is much more likely to berecorded. Sales are a good indicator of size and
therefore growth. Sales may also beconsidered a precise indicator of how a firm is competing
relative to that market.
Business owners themselves often treat sales as key motivator and indicator ofperformance
rather than, for example, job creation. Koech (2011).The small and medium enterprises (SMEs)
sector has continued to play an important role in the economy of South Sudan. The sector’s
contribution to the gross domestic product (GDP) increased from 3.8% in 2005 to about 5% in
2007. The (SME) or informalsector provided 78% of total employment and contributed over
57% of the new jobscreated in 2005/2006 according to the economic survey of 2007. The
Economic Surveyof 2012 estimated that the contribution to the GDP by this sector currently
stands at over5%. The sector therefore plays a key role in employment creation, income
generationand is the bed rock for industrializing the country in the near future. In South Sudan,
there areabout 2.2million micro, small and medium enterprises [Strategic Business
Advisers(Africa) Limited. SME banking sector report 2007] of which 88% are non-registered.
1.1.2 Micro-Finance Services
The concept of micro-financing arose out of the need to provide to the low-incomeearners who
were left out by formal financial institutions. The practice of micro-creditdates back to as early
as 1700 and can be traced to Irish Loan Fund System whichprovided small loans to rural poor
with no collateral. Over the years, the concept ofmicro-finance spread to Latin America, then to
Asia and later to Africa. The today use ofthe expression micro-financing has its roots in the
1970s when organizations, such asGrameen Bank of Bangladesh with the micro-finance pioneer
Mohammad Yunus, werestarting and shaping the modern industry of micro-financing. Mwangi
(2011). In Kenya,micro-finance movement gained momentum in the late 1980s as a result of
exclusion oflarge proportion of the population from the formal financial institution mainly
banks.Micro-finance emerged with the aim of filling the gap left by banks in providing credit to
Individuals, micro, small and medium enterprises which were on the rise during
thisperiod.Ogindo (2006). In the early 1990s with the opening up of political space andensuing
economic disturbances, the need for credit by individuals, micro, small andmedium enterprises
increased and this led to the recognition of micro-finance institutionsin Kenya. Among the
pioneer MFIs in Kenya are Equity Building Society.
The availability of business funding in Southern Sudan have been boosted with the launch of the
Microfinance Development Facility by the Bank of Southern Sudan (BoSS) on Monday
December 10, 2007 in Juba. It plans to award a total of US$1,000,000 to microfinance providers
in the first quarter of 2008.
The facility is supported by the World Bank administered Multi-Donor Trust Fund (MDTF)
within the framework of the Private Sector Development Project (PSD).
The applicants will be evaluated on the basis of among other factors good governance, well
defined quality strategy, good business plans and the ability to build the capacity of the
microfinance clientele.
In selecting the awardees, the BoSS will also take into account the outreach to underserved
population particularly the youth, women ex-combatants and underserved States.
Another competition designed to catalyze awareness of entrepreneurship and promote business
innovation is shortly to take place. The plan offers opportunity for Southern Sudanese
entrepreneurs to compete for start-up grants of $15,000. Each year 20 such grants will be
awarded to the top applicants.
The Acting Manager of the World Bank Juba Sub-Office, Fred Yankey, recognized the huge
development challenges facing Southern Sudan. “But it is pleasing to note that Southern Sudan
has also a huge potential of becoming a strong economy where people can have access to a
myriad of goods and services like the one we are launching today” he commented.
The BoSS representative OthomRogoAjak said the microfinance facility will be an important
instrument in bridging the gap between the poor and the rich.
The representative of the Ministry of Finance and Economic Planning, Kun Ding underlined the
importance of good management of the Microfinance Development Facility if it is to benefit the
people of Southern Sudan.Explaining the background to the project, the Director of the Public
Sector Development in the Ministry of Commerce, Trade and Supply Mary AkechTaban said the
PSD project was initiated 23 months ago and it had since progressed steadily with the technical
support of the World Bank.The World Bank Task Team Leader of the project Mr. Magdi Amin
commended the commitment of the Ministry of Commerce
Trade and Supply and indeed the entire Government of Southern Sudan for striving to extend
services to the people. He said this project would give opportunities for the people to raise
dignified families.
The development of the private sector is enshrined in the Interim Constitution of Southern Sudan
which states that “all levels of government in Southern Sudan shall facilitate the development of
the private sector, particularly indigenous entrepreneurs to establish and develop a viable private
sector capable of participating effectively in reconstruction and development of Southern
Sudan.”
1.1.3 SMEs scenario in South Sudan
Small and Medium Enterprises (SMEs) is an important sub sector for the South Sudan economy
like many other developing countries since it employs about 85% of the South Sudanese
workforce. Thecurrent constitutional framework and the new Micro and Small Enterprise Act
2007 (MSE Act 2007) provide a new window of opportunity through which the evolution
ofSMEs can be realized.
Lack of access to credit is a major constraint inhibiting the growth of SMEs sector. The issues
and problems limiting SMEs acquisition of financial services include lack of tangible security
coupled with inappropriate legal and regulatory framework that does notrecognize innovative
strategies for lending to SMEs. Limited access to formal financedue to poor and insufficient
capacity to deliver financial services to SMEs continues to bea constraint in the growth and
expansion of the sector. Formal financial institutionsperceive SMEs as high risk and
commercially unviable. As a result, only a few SMEsaccess credit from formal financial
institutions in the country.
Various types of assistancehave been provided to SMEs to boost their growth and development
by making themmore profitable. Several Organizations including business associations,voluntary
organizations and other non-governmental organizations have set up programsto enhance the
factors that influence development of SME especially as it relates to enterprise growth and
development. Despite the large number of assistance programs, thegrowth and development of
SME has not been satisfactory. Ventures have collapsed assoon as assisting organizations pull
out of the project and remaining ones have remainedsmall.
1.2 Research Problem
The concept of business growth is still a grey area as there is yet to be a conclusiveapproach and
definite indicators of business growth despite the fact that it is everyentrepreneur’s wish to have
their businesses grow. Thus the subject of business growthis a fertile area for a study in the South
Sudan context. Kemei (2011). Reviews examiningimpacts of microfinance have concluded that,
rigorous quantitative evidence on thenature, magnitude and balance of microfinance impact is
still scarce and inconclusive.
Itis widely acknowledged that no well-known study robustly shows any strong impacts
ofmicrofinance (de Aghion and Morduch (2010).Various studies have been done in South Sudan
on SMEs and how they are influenced bymicrofinance services. Mutuku (2010) studied on the
impact of microfinance institutionson MSMEs in South Sudan and found out that they had a
great impact on employment creationand poverty alleviation. Mbugua (2010) studying on the
impact of micro finance serviceson financial performance of SMEs found that micro finance
services enhancefinancial performances of SMEs. Ngugi (2009); Kioko (2009); Makena (2011)
studiedon the financial challenges faced by SMEs and found that inadequacies in access
tofinance are key obstacles to SMEs growth. Kemei (2011) studied on the relationshipbetween
microfinance services and financial performance of SMEs. The findings werethat positive and
significant relationships have been established between MFIs loans andSMEs performance.
Kimoro (2011) in a study on the impact of microfinance services onwomen empowerment found
that microfinance has led to expansion of freedom of choiceof women. A survey of the financial
constraints hindering growth of SMEs byKoech(2011) found that the factors affecting growth
were capital market, cost, capitalaccess, collateral requirements, capital management and cost of
registration.Coopper(2012) studied on the impact of microfinance services on the growth of
SMEs in Juba and found a strong positive impact. No study had focused on the effects
ofmicrofinance services on the growth of SMEs in South Sudan. The researcher felt that
therewas need for a study on this area and thus this study intended to bridge this gap and focuson
the effects of microfinance services on the growth of SMEs in Central Equatoria. Toachieve the
research objective, the study was guided by the following research question:how do
microfinance services influence the growth of SMEs?
1.3 General Objectives of the study
The objective of the study was to find out the effect of micro finance services on thegrowth of
SMEs in Juba County in South Sudan.
1.4. Specific Objectives
Specifically the study attempt:
• To identify the products offered by Kick –Start Saving and Credit Cooperative to
entrepreneurs.
• To assess the impact of products and services offered by Kick –Start Saving and
Credit Cooperative entrepreneurs
• To know the challenges facing entrepreneurs in accessing the products.
• To find out the challenges Kick –Start Saving and Credit Cooperative faces in
providing services to entrepreneurs.
1.5 Research Questions
To be able to meet the above objectives, the study adopts the following key guiding question:
• What are the products offered by Kick –Start Saving and Credit Cooperative to
entrepreneurs?
• What is the impact of products and services offered by Kick –Start Saving and Credit
Cooperative entrepreneurs?
• What are the challenges facing entrepreneurs in accessing the products?
• What are the challenges Kick –Start Saving and Credit Cooperative faces in providing
services to entrepreneurs?
1.5 Scope of the study
1.5.1 Study Scope
Microfinance Institutions are scattered in the entire geographical landscape of South Sudan more
special in big towns. For the purpose of this study, Kick –Start Saving and Credit Cooperativeis
analyzed, looking at its contributions to the growth entrepreneurs in SMEs and the benefits
derived from the product and services of these Credit cooperative.
1.5.2 Geographic Scope
The study was carried out in the SMEs that are located in Juba City of South Sudan simply
because the majority of SMEs are in Juba where business seems to be booming.
1.5.3 Time Scope
The research study was focused on eight years period starting from 2010 to 2014. This is because
it was along this period that the cooperative was formed as well as the government of South
Sudan under which the SMEs were established and started operation under South Sudan
company laws.
1.6Significance /Importance/ Contributions of the Study.
The study is significant in the following ways:
The findings of the study is going to enable micro finance institutions to betterunderstand their
role in the growth of SMEs in South Sudan in order to implement better andeffective programs.
The study will also exposed possible areas of improvement in micro financing activities in South
Sudan.
The findings of the study are of importance to the government. It is going to assist insetting up
specific management policies that enhance effectiveness and sustainability of SMEs in South
Sudan. Potential investors in the micro finance sector as well as entrepreneurswilling to start
SMEs shall find this study relevant to them. The findings will shed lighton the future of micro
finance institutions and SMEs thus enabling potential investors tomake sound decisions.
The study is also of significance to scholars in understanding the level of SMEs development in
South Sudan which play a significant role in providing ancillary services tomulti-national
corporations. Finally, this study will contribute to the future development ofthis area of research,
particularly in a developing country like South Sudan.
CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION
here, The charpter lokss at literal information of the impact of micro-finance loans on the growth
ot the SMEs It should be noted the different attempts has been made by diifferent Authorsto
review relevant literature on this topic. In this case the the study willfocus on the challenges
facing SMEs in accessing micro-finance loans the challenges facing the operatons of the micro-
finances institutions and the impact of finance institution loans on the growth of SMEs.
Even though there are now perhaps thousands of microfinance programs serving millions of
people, impact evaluations are not as common as they ought to be. As a field, we still lack
continuing hard information about what works well and what does not, and what impacts
microfinance has on micro entrepreneurs in South Sudan. This section covers and defines key
terms as used in the study. This chapter covers the definitions and the need for impact
assessment studies in relation to Microfinance Institutions and entrepreneurs in small and
medium enterprise; current and major authors view on the techniques used in impact assessment.
Methodological issues in undertaking Impact studies depend on a mixture of research methods
chosen and give the degree of reliability and rigidity to data collection for the study. The design
of the impact assessment in relation to triangulation of information from different sources has
immense impact on the reliability and credibility of the study. This section also mentions tools
available for Impact studies and the importance of using these tools as guidance and not as a
template. The design of study in relation to selection of research method and tools to undertake
studies is basically due to resources available in terms of cost and capacity. This has been the
major limitations in undertaking studies especially for Micro Finance Services in the entire
nation.
In most developing countries microfinance has been used as one of the tools for development, as
such most development project has microfinance as one of its components. The impact of these
microfinance projects in relation to the partner institutions and their clients, sometimes called
beneficiaries has been up for discussions among policy makers, developing partners and the
practitioners. Microfinance is hailed as a tool for poverty alleviation and is one of the major
strategies to achieve the Millennium Development Goals (MDGs). This is because access to
financial services assists poor households in meeting their basic financial needs, protects them
against risks, and reduces their vulnerability to shocks, by building assets. Ultimately, this
financial service develops their social and economic empowerment. It is further argued that
financial services for the poor can help them turn their savings into sums large enough to satisfy
a wide range of businesses, consumption, personal, social, and asset-building needs (Project
Parivartan 2006). It also enables them to take advantage of economic opportunities, to build
assets, and to reduce their vulnerability to external shocks that adversely affect their living
standards, (Mejeha and Nwachukwu 2008, Ramirez 2006, Woroniuk and Schawk 1998).
Some of the main pertinent issues have been the low capacity of the participating microfinance
institutions to undertake such exercises which are mostly carried out by their developing
partners. There are issues related to the development projects themselves, the question of
sustainability and whether these projects have had any positive and meaningful impact on the
lives of the clients or it create a dependency and rather reduced their opportunity to come out of
their poverty traps. Other school of thought has also questioned the methodologies used by
microfinance institutions and microfinance projects in evaluating their impact, which vary
greatly, Goldberg (2005).
2.1.1 MICROFINANCE
Micro finance, according to (Khawari, 2004) is “generally an umbrella term that refers to the
provision of a broad range of services such as deposits, loans, payment services, money transfers
and insurance to poor and low-income households and their micro-enterprises”. Schreiner and
Colombet (2001, p.339) define microfinance as “the attempt to improve access to small deposits
and small loans for poor households neglected by banks.” Robinson (2001) microfinance refers
to small scale financial services for both credits and deposits- that are provided to people who
farm or fish or herd; operate small or microenterprise where goods are produced, recycled,
repaired, or traded; provide services; work for wages or commissions; gain income from renting
out small amounts of land, vehicles, draft animals, or machinery and tools; and to other
individuals and local groups in developing countries in both rural and urban areas.
CGAP (2003) defines it as the supply of loans, savings and other financial services to the poor.
Microfinance is the provision of credit and other financial services like savings and insurance to
micro, small and medium scale enterprise (UNDP, Microstart Guide, 1997).
2.1.2 APPROACHES TO MICROFINANCE
According to Ledgerwood (1999), there are two approaches to microfinance. The first is what is
termed the minimalist approach which looks at financial intermediation only. The second is an
integrated approach which considers financial services as well as their interrelationships with
social intermediation such as health, education, training and development. Microfinance tend to
be economic in nature, such as its effect of facilitating development of businesses, increasing
income, and decreasing dependence on outside help, these impacts have close ties to matters of
global public agenda of making basic amenities accessible by the poor, in this case bridging the
gap between the rich and the poor. Microfinance initiatives can easily go hand in hand with
health services and outreach programs which lead to better economic prosperity. Local
microfinance institutions can become the source of not only financial services but also a place to
get information about basic needs of their clients. MFIs may have its main objective of providing
financial services only but may offer limited social intermediation occasionally. In this case, the
MFI is using a minimalist approach. On the other hand, an MFI uses an integrated approach
when it takes a more holistic view of the clients. It is a combination of both financial and social
intermediation, enterprise development and social services. An MFI chooses a minimalist or
integrated approach depending on it main objectives and the circumstances (demand and supply)
in which it is operating.
2.1.3 MICRO CREDIT
Micro credit is the practice of offering small, collateral free loans to members of co-operatives
who otherwise would not have access to the capital necessary to begin small business.
(Hobnssain 2002). Microcredit is thus one of the critical dimensions of the broad range
offinancial tools for the poor. An empirical research and further study show that the poor have
the capacity to use loans effectively for income-generation, to save and re-pay loan. Simanowitz
and Brody (2004, p.1) argue that “micro-credit is a key strategy in reaching the MDGs and in
building global financial systems that meet the needs of the most poor people”. Littlefield,
Murduch and Hashemi (2003) report “micro credit is a critical contextual factor with strong
impact on the achievements of the MDGs. Micro credit is unique among development
interventions: it can deliver social benefits on an ongoing, permanent basis and on a large scale.
2.1.4 MICRO INSURANCE
Micro insurance is a component of microfinance. It is defined in terms of client and not
insurance furnished by a small institution. Churchill (2006) defines micro insurance as the
protection of low-income people against specific perils in exchange for regular monetary
payments (premiums) proportionate to the likelihood and cost of the risk involved. As with all
insurance, risk pooling under micro insurance attempts to allow many individuals or groups to
pool risks and redistribute the costs of the risky events within the pool. Microfinance institutions
have played an active role in reducing or protecting against this vulnerability through providing
credit for increasing income earning opportunities and through providing savings services to
build up resources that can be drawn down in cases of emergencies.
CHAPTER THREE
RESEARCH METHODOLOGY3.0 INTRODUCTION
In the last chapter, previous literature on Impact of Microfinance on entrepreneurs was reviewed
and those related to the research topic were analyzed to suit the research topic. The chapter also
captured definitions of various terms in relation to Microfinance. This chapter of the dissertation
explains the methods adopted in gathering data for the study. Two sources of data were used for
this dissertation; these were primary source of data and secondary sources of data.
3.1 RESEARCH DESIGN
The research design for the topic under study was descriptive and analytical. This research
design adopted help in the analysis of the dissertation which is a case study of an Impacts of
Microfinance Institution on entrepreneurs in Small and Medium Enterprise in the Juba South
Sudan. The rationale of the case study was to focus the discussion on how Microfinance is
actually impacting on entrepreneurs in small and medium enterprises and suggest solution to
challenges found where necessary in the cause of the research. Case study was used because it is
accepted as the most viable, convenient and meaningful research tool and technique for gathering
data for thesis, essays and researches (Merriam, 1998, cited in Emmanuel.2008 p.40).
3.2 METHODS OF DATA COLLECTION
The data collected will be based on interviews and questionnaires sent by the researcher to the
respondents of which quick feedback will be expected from the respondents. The questionnaires
will be administered by the researcher undertaking the study at the premises of respondents and
the premises of the company. The administration of questionnaires to respondents at their
premises is to ensure that respondents will have enough time to answer the questions without
rush. The questions will painstakingly be explained to respondents to ensure better understanding
that probably led to the provision of required answers. The researchershall spend an average of
12 minutes on each respondent and will use three weeks to administer all the questionnaires. The
types of questionnaires used will be closed and open ended format. The closed ended format will
give respondents options to choose from whiles the open ended format will be used so that
respondents could provide their own answers.
3.3 SAMPLE AND SAMPLE PROCEDURE FOR DATA COLLECTION
For a reliable result, interviews will be conducted and questionnaires be used. The sample size
used will be of clients of Kick Start Saving and credited cooperatives. The manager SACO will
be interviewed and shall fill questionnaires to enable the researcher know much about the
operations of the company. Random sampling will be used for data gathering from clients of the
company and non -random sampling be used to gather data from the branch manager.
3.4 DATA ANALYSIS
The data will be analyzed based on the data collected. Analysis from this research will copiously
Be explained with critical and analytical comments and also, well-illustrated in graphical and
tabular forms for easy understanding and followed by a summary of analysis. Microsoft office
Word, Excel and Statistical Package for Social Scientist (SPSS) will be used to process data
collected into tables, bar charts, Pie charts and other charts to make easier understanding and
interpretation.
3.5 ANTICIPATED LIMITATION AND DELIMITATIONS.
• Inadequate literature on impact of microfinance on the growth of SMEs enterprise in
South Sudan is anticipated to be a bigger challenge to this study. However, the researcher
will use literatures from other developing countries to overcome the challenges.
• The study will also be affected by non-responsiveness from some of the Small and
Medium Enterprises owners which shall be contacted especially those small firms who
were very much sensitive to avail their growth information. The researcher will therefore
obtain an introduction letter to Makerere Biz Tech College department of the research to
convince the despondences that their responses were treated confidentially.
• High illiteracy rate among the SMEs in South Sudan will affect the quality of information
that will be obtained. The researcher will minimized obtaining information from illiterate
individuals which ensured that the information quality obtained were not diluted
• Time limitations together with financial constraints will not permit an in-depth
investigation given the intensity of research. The researcher will mitigated this by trying
to work within the limits of the budget to make the study a success.