1.1 Background Information
In the developing countries there are number of individuals who are financially unprivileged. However, microfinance institutions (MFIs) have globally recognized true financial needs as prospective component of strategies of development organizations, governments, and societies to promote enterprises in developing countries. Microfinance programs and institutions have become an increasingly important component of strategies to reduce poverty through promotion of micro and small enterprise development. However, knowledge about the achievements of such initiatives remains only partial and contested (Hulme, 2000). They are organizations with a goal to serve the need of unprivileged or under-served markets as a means of meeting development objectives. Microfinance institutions enable enterprises owner to develop their micro and small enterprises, which enhance their income earning capacity, and hence enjoy an improved living standard (Mosley, 2001).
One common solution to resolve poverty is providing microfinance to the poor. Microfinance has been claimed to positively impact the livelihoods of the poor through accumulation of social, human, financial, natural, and physical resources. The most findings suggest that the process of accumulation of assets, leads to creation of livelihoods that result in increased household income and poverty reduction (Ranjula, 2007).Offering financial services to the unprivileged is a complex task and past attempts have been rather unsuccessful. One commendable
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effort that has sprung from the failures of commercial banks is microfinance and thanks to innovative ideas that microfinance institutions have managed to cope with many of the challenges previously experienced by the formal bank sector in the 1970’s through the 90’s.
The “new” approach has successfully managed to overcome obstacles such as lack of collateral and information asymmetry. By using joint-liability schemes and by requiring frequent installments, microfinance institutions have managed to reduce their risk exposure and by outsourcing the screening process to the borrowers they have dealt with the lack of information on their clients (Viktor and Arizo, 2007).Savings and credit co-operatives Society (SACCOS) are community membership-based financial institutions that are formed and owned by their members in promotion of their economic interests (Fred, 2007).
Credit is considered to be an essential input to increase productivity such as business activities, agricultural productivity, mainly land and labor. It is believed that credit boost income levels, increases employment at the household level and thereby alleviate poverty. Credit enables poor people to overcome their liquidity constraints and undertake some investments. Microfinance is a key policy strategy for poverty alleviation. Inadequate access to credit by the poor has been identified as one of the contributing factors to poverty, (Nathan et al, 2004). Furthermore credit helps poor people to smoothen out their consumption patterns during the lean periods of the year (Binswager and Khandker, 1995). By so doing, credit maintains the productive capacity of poor rural households (Heidhues, 1995). In many developing countries
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the financial institutions in the most distress are part of the public sector (World Bank, 1989) also observed that improved consumption is an investment in the productivity of the labour force.
However, there are number of cases which are much concern with problem of failure of loan recovery as reported by (Kalegeya, 2005). The commercial court as court of choice for loan recovery and related disputes was established to deal specifically with commercial disputes. At present the court is more than five years old and has gained a good experience on Financial Institutions / loan recovery relationship / disputes and related, in courts. Since its inception in (1999), over 85% of the cases filed were from financial institutions seeking recovery of their loans (Kalegeya, 2005). A study by (Mallika, 2001) showed that there were both similarities and differences between the experiences of women from the developing world and developed world. Specifically, this study found that the start-up problems faced by women in both cases were similar although there were important differences in other areas. These women were different from women entrepreneurs from antecedent conditions (e.g., support services). Differences in reasons for starting a business and succeeding in it were also found. Some of these differences may be due to socio-cultural differences between India and other nations.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Purpose of the Study
1.4 Significance of the Study
1.5 Research Questions
1.6 Delimitations of the Study
1.7 Limitation of the study
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Review of Related Literature
2.2 Empirical Studies
2.3 Theoretical Framework
CHAPTER THREE: RESEARCH METHOD
3.1 Introduction
3.2 Area of the Study
3.3 Research Design
3.4 Population of the Study
3.5 Sample and Sampling Technique
3.6 Research Instrument
3.7 Validation of the Instrument
3.8 Data Collection Technique
3.9 Data Analysis Technique
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS
AND DISCUSSION
4.1 Introduction
4.2 Data Presentation
4.3 Discussion of Findings
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Introduction
5.2 Summary of Findings
5.3 Conclusion
5.4 Recommendations
5.5 Suggestions for Further Research
References
Appendix