The contribution of microfinance institutions in the process of reducing poverty in Rwanda: a case of Unguka bank SA.

Abstract

This study assessed the contribution of Microfinance institutions in the process of reducing poverty. A case of Unguka bank. The study identified different microfinance institutions and poverty concepts and assessed their contribution in reducing poverty in Rwanda. The study involved both desk and field research. Desk research involved collection of information related to the theories and concepts of microfinance and poverty. Field research was conducted in Unguka bank at its headquarter in Remera. sixty Unguka bank clients reached by the researcher through using questionnaires while two senior managers from Unguka management provided the information through an interview guide. 60 Unguka bank clients were selected using convenience sampling technique while the two senior managers of this microfinance bank was selected using judgemental sampling. An SPSS program was used to analyze data and data were presented into tables to make analysis and interpretation easier. The findings show that Unguka bank clients had improved their living conditions in terms of affording to pay school fees for their dependants, affording medical insurance fees for their dependants and affording good housing or accommodation. In addition to that, the researcher found that after joining Unguka bank majority of the clients can now manage to have monthly savings which was not the case before joining Unguka. It was also found that majority of people who are dealing with Unguka bank are employing other people in their businesses which means they created jobs for others and the dominant loans they had received are loan in solidarity (which involves social guarantee) as well as ordinary credit. they are however facing some problems like delays in processing loans, receiving small loan amount as well as high interest rates which they obliged to pay once they accessed finance from Unguka. The conclusion therefore was that Unguka bank need to revise its ceiling in credit offering as today the ceiling is at ten million Rwandan francs. They should also take into consideration the fact that most people who deal with microfinance banks are the ones with no collaterals and facilitate them to easily access finance. It is further recommended that Unguka bank should speed up processing of loans, reduce interest rates charged to enable the poor to access finance, as wells as keep lifting the ceiling set on the amount clients cannot exceed when they are requesting loans from there.