THE ROLE OF FINANCIAL INSTITUTIONS IN SAVINGS MOBILIZATION:

THE CASE OF PRIDE MICROFINANCE UGANDA LTD

BY
NAMARA EMILY
07/U/12684/EXT

RESEARCH REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF THE DEGREE OF BACHELOR OF
COMMERCE OF MAKERERE UNIVERSITY.

AUGUST 2011
 DECLARATION

I NAMARA EMILY do hereby declare that this research report is my original piece of work

and has not been submitted for any other or similar award in any academic institution.

Signed: Date:

Namara Emily

07/U/12684/EXT

i
 APPROVAL
This is to certify that this report on “The Role of Financial Institutions in Savings Mobilization,

The case of Pride Microfinance Uganda Limited” has been under my supervision and is now

ready for submission to Makerere University for the award of the degree of bachelor of

commerce.

Signed: Date:

M/s. NABIDDO WINNIE

(Supervisor)

ii
 DEDICATION
I dedicate this work to my late mother Natukunda Imelda, My uncles, My Aunties, My sister

Lubango Carol and her lovely daughter Casie, and My special friend Lubega Moses.

iii
 ACKNOWLEDGEMENT

I am so thankful to the Almighty God who has made it possible, under all circumstances, for me
to carry out this research.

I am so grateful to my supervisor M/s. Nabiddo Winnie for her academic guidance, time;
encouragement and patience that has seen me through, making this work a success. Thank you
for your supervision.

Special thanks go out to my beloved family members, and my guardians Uncle Ben, Kamukama,
Davis, Robert, Auntie Annet, Auntie Carol and her family, My sister Carol, My special friend
Lubega Moses for their support, love, advice and encouragement throughout the period of my
study. May God reward you with lots of blessings!

I lastly wish to extend my sincere gratitude toward my friends Liz B, Lizmo, Prossy, Davis,
Nobert, all my group members and all those who have tirelessly guided and encouraged me at all
times throughout my course. Thank you very much and may almighty God reward you
abundantly!

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 TABLE OF CONTENTS

CONTENTS PAGE

DECLARATION..............................................................................................................................i

APPROVAL....................................................................................................................................ii

DEDICATION...............................................................................................................................iii

ACKNOWLEDGEMENT..............................................................................................................iv

TABLE OF CONTENTS................................................................................................................v

LIST OF TABLES.......................................................................................................................viii

LIST OF ABBREVIATIONS........................................................................................................ix

ABSTRACT....................................................................................................................................x

CHAPTER ONE............................................................................................................................1

INTRODUCTION.........................................................................................................................1

1.1 Background to the study.......................................................................................................1

1.2 Statement of the problem.....................................................................................................2

1.3 Purpose of the study..............................................................................................................2

1.4 Objectives of the study..........................................................................................................3

1.5 Research questions................................................................................................................3

1.6 Scope of the study.................................................................................................................4

1.7 Significance of the study......................................................................................................4

CHAPTER TWO...........................................................................................................................5

LITERATURE REVIEW.............................................................................................................5

2.1 Introduction...........................................................................................................................5

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2.2 The concept of financial institutions.......................................................................................5

2.3 The concept of savings mobilization....................................................................................5

2.4 The role of financial institutions in savings mobilization....................................................6

2.5 Strategies financial institutions to mobilize savings in rural areas.......................................9

2.6 Conclusion..........................................................................................................................12

CHAPTER THREE.....................................................................................................................13

METHODOLOGY......................................................................................................................13

3.1 Introduction.........................................................................................................................13

3.2 Research design..................................................................................................................13

3.3 Study population.................................................................................................................13

3.4 Sample size, sampling methods and sampling procedure..................................................14

3.5 Data source.........................................................................................................................14

3.6 Data collection instruments and methods...........................................................................14

3.7 Data collection procedure...................................................................................................14

3.8 Data processing, analysis and presentation........................................................................15

CHAPTER FOUR.......................................................................................................................16

Presentation, Analysis and Discussion of Findings...................................................................16

4.1 The response rate of respondents........................................................................................16

4.2 Demographic characteristics...............................................................................................17

4.3 The level of savings mobilization in Pride Micro Finance.................................................18

4.5 Relationship between Pride micro finance strategies for savings mobilization and savings
mobilization...................................................................................................................................22

CHAPTER FIVE.........................................................................................................................24

5.1 Introduction.........................................................................................................................24

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5.2 Summary of findings..........................................................................................................24

5.3 Conclusion..........................................................................................................................24

5.5 Area for further research.....................................................................................................26

REFERENCES..............................................................................................................................27

QUESTIONNAIRE.......................................................................................................................29

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 LIST OF TABLES
Table 4.1:The response rate of respondents.................................................................................. 16

Table 4.2: Responses by gender.................................................................................................... 17

Table 4.3: Responses by age........................................................................................................17

Table 4.4: The working positions of respondents..........................................................................17

Table 4.5: The period employees have spent in the organization..................................................18

Table 4.6: Showing the most service offered by Pride Micro Finance......................................... 18

Table 4.7: Showing the common form of savings mobilization offered by Pride Micro Finance.
....................................................................................................................................................... 19

Table 4.8: Showing factors that affect the level of savings mobilization in Pride Micro finance. 20

Table 4.9: Showing promotional tools used by Pride to promote its activities............................. 21

Table 4.10: Showing strategies used by Pride micro finance to mobilize savings........................21

Table 4.11: Showing the effectiveness of some of the strategies used by Pride micro finance to
mobilize savings............................................................................................................................ 22

Table 4.12: Computing the relationship between Pride micro finance strategies for savings
mobilization and savings mobilization.......................................................................................... 23

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 LIST OF ABBREVIATIONS
MFI: Micro Finance Institution

SPSS: Statistical package for Social Scientists

UG: Uganda

ix
 ABSTRACT
Willingness to save meanwhile is believed to depend on the ease of access to savings
instruments, the attractiveness of such instruments and the prevailing economic conditions, yet
microfinance institutions in Uganda seem not to have favorable conditions for such activities.
The main study objective was to examine the performance level of the pride microfinance in
respect to savings mobilization in rural areas. It has been noted that most banks which are the
main financial institutions that have engaged in savings mobilization have mainly concentrated
in the urban areas leaving out the rural areas and this has affected the ability to mobilize savings
in such areas, however this problem can be solved by promoting microfinance institutions to
concentrate their activities in rural areas but this has not been exploited by them. Findings
revealed that the performance level of pride microfinance in respect to savings mobilization in
the rural areas revealed a low level of performance. Recommendations are that government
should put in place adequate policies for financial institutions to mobilize adequate savings from
the rural areas; basically offerings high interest rates could world to attract more customers.

Key words:
Financial Institutions, Savings Mobilization, Pride Microfinance Uganda Ltd.

x
 CHAPTER ONE

INTRODUCTION

1.1 Background to the study

Financial institutions are those institutions which mobilize funds from the public and place them

in financial assets such as deposits, loans and bonds rather than tangible property,

(www.investorswords.com). Majority of financial institutions have engaged themselves in

savings mobilization and have played a significant role in providing various savings services and

products such as bonds, accounts holdings with interest yielding and they have played a vital role

in savings mobilization.

Savings can be defined as income not spent on consumption. In case of salaried worker, it’s that

proportion of income not spent on consumption. People save for a variety of reasons including

putting aside money for a rainy day, out of plan habit and targeting of some big purchase in

future. Among the factors that determine saving behavior is ability to save which depends on

disposable income, propensity to save, access to financial institutions and the type of savings

were found to determine the form of savings held. While most efforts to save are voluntary,

others are compulsory as in the case of social security contributions, (Bagonza, 2001).

The system of financial intermediation can affect economic performance and growth directly

through the role it plays in savings mobilization. In particular the financial intermediation

channels savings into the most productive investment projects and thus contributes to higher

rates of growth, (Matovu, 2010). Uganda as a country faces low savings rates in spite of stable

macroeconomic stabilization effort. It has the lowest savings rate of any developing region, the

capacity to save is mainly determined by income level, rate of income growth and the

1
dependency ratio i.e. the ratio of population under 16 or above 60 years old to that of the

working age population, (Loayza et al, 2000). Willingness to save meanwhile is believed to

depend on the ease of access to savings instruments, the attractiveness of such instruments and

the prevailing economic conditions, (Wright, 1999) yet Micro finance institutions in Uganda

seem not to have favourable conditions for such activities.

1.2 Statement of the problem

Financial institutions have time and again played a crucial role in savings mobilization in the

economy; however they are more concentrated in urbanized areas than rural areas, which limit

their savings mobilization. As noted by Matovu,(2010) in the book ‘Domestic resource

mobilization in Sub – Saharan Africa the case of Uganda’s stated that most banks which are the

main financial institutions that have engaged in savings mobilization have mainly concentrated

in the urban areas leaving out the rural areas and this has affected the ability to mobilize savings

in such areas. However this problem can be solved by promoting microfinance institutions to

concentrate their activities in rural areas but this has not been exploited by them, (Matovu, 2010).

Therefore this research looks at the various factors that affect savings mobilization, role of

financial institutions in savings mobilization and lastly the relationship between the role of

financial institutions and savings mobilization so as to identify strategies that can be employed

by FIs to mobilize savings in rural areas.

1.3 Purpose of the study

The purpose of the study aimed at establishing why savings mobilization has not been fully and

potentially exploited by the numerous financial institutions especially micro finance institutions

in the rural areas.

2
1.4 Objectives of the study

The study was guided by the following research objectives:

i. To examine the performance level of the pride micro finance in respect to savings

mobilization in rural areas.

ii. To find out what strategies have been employed by pride Microfinance especially in the

rural areas to increase their savings mobilization levels.

iii. To establish the relationship between Pride micro finance strategies for savings

mobilization and savings mobilization

1.5 Research questions

The study answered the following research questions:

i. What is the performance level of the Pride Micro Finance in respect to savings

mobilization in rural areas?

ii. What strategies have been employed by pride Microfinance especially in the rural areas

to increase their savings mobilization levels?

iii. What is the relationship between Pride micro finance strategies for savings mobilization

and savings mobilization?

3
1.6 Scope of the study

The research is on Pride microfinance Uganda Limited, the study focuses on the role of financial

institutions in savings mobilization as the independent and dependent variable respectively.

Financial institutions involves those institutions which mobilize funds from the public and place

them in financial assets such as deposits, loans, and bonds rather than tangible property. They

include commercial banks, microfinance institutions to mention but a few. But this study

particularly focused on Pride Micro Finance one of the financial institutions whose operational

scope is rural based

The research covered the period of 2008 to 2010 in which financial institutions have increased in

the country yet rural savings mobilization remains low.

1.7 Significance of the study.

i. The findings of the research will enable pride microfinance to know what kind of

strategies, procedures, and policies to employ to increase their savings mobilization

potential in rural areas.

ii. The study will help government in formulating policies and regulations that will favor

savings mobilization by financial institutions in rural areas.

iii. To the researcher, the study will improve her basic research skills from which she can

base to conduct applied research for purposes of career and practice development.

4
 CHAPTER TWO

LITERATURE REVIEW
2.1 Introduction

This chapter reviews related literature to the study. The review focuses on the concepts of

financial institutions, savings mobilizations, how financial institutions mobilize savings,

financial institution’s role in savings mobilization and strategies that financial institutions to

increase savings mobilization.

2.2 The concept of financial institutions

An organization, which may be either for-profit or non-profit, that takes money from clients and

places it in any of a variety of investment vehicles for the benefit of both the client and the

organization. Common examples of financial institutions are retail banks, which take deposits

into safekeeping and use them to make loans to other customers, and insurance companies,

which do not take deposits, but provide guarantees of payment if a certain situation occurs in

exchange for a premium and micro finance institutions that are known for credit advancement

and savings mobilizations (Dmitri et al, 1991).

2.3 The concept of savings mobilization

Savings are cash or physical products set aside for future use. Therefore savings mobilization is a

way to keep cash or physical purposes n amounts suitable for investment purposes (Mpuga,

1999).

5
People in rural and other low-income communities, although poor, can save when they are

guided and encouraged. In rural communities, savings are made through traditional credit

rotation groups, or purchase of domestic animals (goats, pigs, chickens or cows).

Every micro-enterprise needs injection of capital or funds which may be owner's money or a

loan. When a loan is used, it is someone else who has done the saving. Micro enterprises, like

other businesses, convert savings (of the owners and of others) into investment, in the generation

of wealth.

2.4 The role of financial institutions in savings mobilization

In financial institutions savings are transformed into deposits, which may either be normal

savings or time fixed deposits. These constitute the bulk of their working capital, if on lent. In

other words the core resources used in financial institutions are comprised of deposits from the

public, which is one of their primary resources of funds. For this reason financial institutions

have a task of attracting customers to keep deposits with them. This is known as savings

mobilization. It involves tapping the savings the public may hold by provision of several assets

in which people can save, (Mpuga, 1999).

Financial institutions provide a system where savers deposit their amounts and borrowers can

access such amounts. This ensures an efficient transformation of mobilized funds into real

productive capital. Financial institutions comprise of both the formal and informal sector.

The mobilization of savings and channeling credit to the lower income group in both the rural

and urban areas is done by the informal sector, (Dmitri et al, 1991). They play a significant role

in savings mobilization for example microfinance institutions though they are not allowed to

6
mobilize deposits; they fill the gap left by formal institutions (Kasekende, 1998). The formal

sector includes central bank, commercial banks, credit institutions, development banks and so on.

For financial intermediaries, savings mobilization increases the supply of internally generated

funds that can be invested in housing, microenterprise and small business loans,

(www.woccu.org/education/savimgs).

Savings is a foundational pillar in inclusive financial system. Savings contributes to financial

inclusion at the client, microfinance institutions and industry levels. Savings services strengthen

the finances of low- income households, savings deposits strengthen the funding base or

microfinance and are the basis for a competitive, efficient and sound microfinance industry,

(Alliance for financial inclusion policy/ formalizing microsavings,2010).

On a micro level, there’s of course an extensive body of academic research to explain how a well

developed (deep) financial market contributes to economic growth in a country, an industry and

in individual firms,( Levine,2005). Further it shows that financial development reduces income

inequality in general, has a disproportionately positive impact on the income of the poor, and that

it contributes to poverty alleviation, (Beck,et.al,2007).

MFIs that intermediate deposits are the best positioned to sustain growth and innovation. MFIs

that are funding growth by mobilizing local savings as regulated financial intermediaries have

derived benefits from deposit-based funding in at least three ways. First, deposits tend to be more

stable and scalable funding source relative to other options. Microcredit organizations typically

face challenges with wholesale funding related to finance costs, term structure, currency risk,

administrative effort and ultimately getting enough capital to fund growth that keeps up with

7
demand. Also the recent international financial crisis has demonstrated the liquidity risks

associated with over dependence on foreign debt funding. In addition to the stability of savings

in most markets, it’s also a less expensive funding source.

The second benefit manifests in incentives that drive a MFIs approach to growth and expansion.

Deposit based institutions link their asset growth to deposits and therefore growth is based on

service to savers and the perception of savers of the integrity to MFI. These MFIs tend to be

disciplined, service-oriented and cautions about their reputation. Deposit funding also links the

MFI evolution to economic realities since MFIs can only grow if they are successful in

intermediating effective market demand for savings and credit.

Finally deposit-based MFIs enjoy customer loyalty since customers that save in an institution

have a sense of trust and ownership that credit clients don’t necessary have. For some customer’s

savings may be the first step to accessing credit and other services later on, (AFI

policy/formalizing microsavings, 2010).

To increase savings, policies should be focused on the major determinates of savings in the

economy,(Mukwanason, 1994). The mobilization of small and micro savings respond to demand

if the poor and is commercially viable source of funds. It should be noted that successful savings

mobilization requires a macroeconomic environment that is conducive. Financial institutions

need to put in place strategies that are dynamic and aggressive to encourage savings by

enhancing public confidence, provide cost effective schemes, and most importantly they must be

seen by the public especially to the concerned not only with balancing sheets but promoting

peoples welfare and prosperity, (Bagonza, 2001).It’s important to understand why people save,

8
in doing so financial institutions will create products that are suitable and complement with the

needs of those who save,(Fin scope Ug, 2009)

Communities in Uganda have always raised capital for farming, petty trading and other income

generating activities through savings mobilization. It is this traditional arrangement that modern

micro finance institutions are trying to modify in the mobilization of savings. Over the last

decade, micro finance institutions have found those poor households are interested in a variety of

savings services and products. Deposit services allow low income household to save for large

expenses like dowries, or school fees, accumulate funds for future investment as purchasing a

cow, or prepare for periods such as rainy periods when they may have little or no income; this is

according to the microfinance experience with savings mobilizations and that they are basically

two reasons why microfinance should mobilize savings. Locally mobilized savings are

potentially the largest and the most immediate available source of finance for some microfinance

institutions, and there is a vast demand for institutions savings services at the local levels.

2.5 Strategies financial institutions to mobilize savings in rural areas

According to savings mobilization as a financial instrument and its relevance to the poor by

Marguerite Robinson, 2010, the following preconditions are needed by M.F.I is for savings

mobilization. They are grouped into outside M.F.Is and within the M.I.Fs control.

Outside MFI Controls are controls that are found outside MFI regulation and they include

enabling macro economy and some degree of political stability (no hyper inflation or continuing

serve warfare), appropriate regulatory environment, public supervision. Within M.F.I control;

these are controls that operate within the microfinance institutions and they include good track

record of accountable ownership, effective governance, consistently good management of funds

9
and allocation of full time high level committed management plus a financially sound with a

high rate of loan recovery and consistently good returns.

The system of financial intermediation can affect economic performance and growth directly

through the role it plays in savings mobilization. Pride microfinance has played this vital role of

savings mobilization especially in the rural areas. It offers various savings accounts and it is a

deposit taking institutions. It has facilitated the growth and empowerment of women who have

been beneficiaries because it offers a wide range of appropriate instruments. According to

Winiwiski, (1999) financial instruments play a vital role in facilitating savings because of

appropriate instruments.

Savings play a crucial role in financial management strategies of the poor. Deposit facilities

make it easier for poor clients to turn small amounts of money into ‘useful lump sums’, enabling

them to smooth consumption and mitigate the effects of economic shocks,( Rutherford, 2001).

Secure savings also can provide a measure of independence to socially and economically

vulnerable individuals, notably women and children and unlike credit; the benefits of savings are

not limited to the economically active. Although significant research has document the benefits

of savings to the poor, the microfinance sector remains focused largely on credit delivery.

Funders and government often don’t realize how vital asset- building policies and that savings

mobilization can bring many benefits to the poor clients and microfinance providers (e.g. stable

funding and protection from the foreign exchange risk.

Savings are fundamental to sustainable economic development. Savings are by far the most

frequent source of funding to microfinance startup and expansion. They also enable households

to build for the future and better prepare for unexpected emergencies. Woccu credit union

10
savings mobilization profit in Latin America have demonstrated that lower income people will

substantially increase their savings deposit if provided with convenient service, market returns

and security for their savings. Yet millions of people throughout the region lack access to safe,

reliable and convenient savings services,(www.woccu.org/education/savings).

According to www.woccu.org/education/savings the following key principles and is developing

operational guidelines and tools to be utilized by all microfinance institutions for mobilizing

savings. Preconditions for savings mobilization include legal deposits: is there an appropriate

legal framework in place to identify which institutions are able to receive deposits and what

recourse savers have to recover their deposits? Are you authorized to capture savings? Do you

have a charter and by laws established? Is an effective system of supervision in place?

External analysis; under this one has to consider the following, is there a market for saving

products in your geographic location? Which institutions are capturing savings now? Also one

has to look at prudential a discipline that’s to say do you understand the minimum standards?

Have you established the core financial disciples of delinquency control, loan loss provisions,

liquidity reserves and capital reserving to protect client savings? To mention a few.

The following procedures for efficient savings mobilization would benefit every financial

institution especially M.F.Is in collecting savings and they are completion of savings registration

form with passport size photographs and payment of fees, maintaining savings accounts for

individual and group, issuances of savings pass books and opening of ledger records, issuances

of receipts for every deposit within their means and lastly flexibility of deposits time and

withdrawal rates.

11
2.6 Conclusion

Savings mobilization requires a macroeconomic environment that is conducive, (Bategaka, 1998)

and policy makers must ensure an effective regulatory framework that entails adequate

protection of savings and provide incentives for sound management. But these seem to be

lacking in Ugandan financial institutions. The study therefore will assess the extent to which

financial institutions in Uganda possess favorable macroeconomic environment conditions to

enhance savings mobilization in rural areas where they are currently performing below par.

12
 CHAPTER THREE

METHODOLOGY
3.1 Introduction

This chapter covers research methodology and specifically research design, the type of data that

was adopted in carrying out research, sources of data, data collection instruments, data collection

procedure, measurement of variables, data presentation and analysis methods as well as

limitations that were encountered during the study and how they were overcome.

3.2 Research design

The study adopted a case study design. A case study is a method for learning about a complex

instance based on a comprehensive understanding of that instance obtained by extensive

description and analysis of that instance taken as a whole in its context, (Chelimsky, and 2001).

For this study Pride microfinance Ltd Uganda headquarters as a single site is chosen as a case

study.

3.3 Study population

The study was conducted at Pride Micro Finance Ltd, Uganda headquarters in Kampala. The

population comprised of workers of pride MFI both at the top management, middle management

and lower management levels.

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3.4 Sample size, sampling methods and sampling procedure

The sample size comprised of 20 respondents from the management of Pride microfinance

involving top management, middle management and lower cadre. One of the sampling methods

was stratified as per management levels to involve employees at different levels of management,

simple random sampling was adopted in identifying respondents from each level to minimize

bias.

3.5 Data source

Both primary and secondary data was used. The primary data was sourced from the management

of Pride MFI. The secondary data was sourced from existing information regarding financial

institutions and savings mobilizations. This was sourced from records kept by Pride MFI such as

registration books showing the number of savers, and types of accounts held.

3.6 Data collection instruments and methods

Data was collected through self administered questionnaires and interviews. Both close ended

and open ended questions were involved in the questionnaire for the former to collect precise

information about the study variables and for the later to clarify on the responses given in the

close ended questions. The open ended questions also stimulated interviews between the

researcher and the respondent.

3.7 Data collection procedure

The research presented a letter of introduction to the management of Pride microfinance limited

headquarters showing the reasons of research. Questionnaires were administered by the

researcher and she filled as responses were being obtained directly from the respondent. This

14
was a one by one respondent at a time until all the respondents were covered. In the process, the

researcher asked questions where clarity was required.

3.8 Data processing, analysis and presentation

Raw data was thoroughly edited, coded and entered in to SPSS data editor for analysis. Major

analytical statics included frequencies and percentages while tables were the basic methods for

data presentation. Themes were developed in accordance with study objectives for the analysis of

qualitative data. The relationship between variables was determined using spearman’s rank

correlation coefficient.

15
 CHAPTER FOUR

Presentation, Analysis and Discussion of Findings

4.1 Introduction

This chapter includes the presentation, analysis and discussion of findings in accordance with the

study objectives. However, the background information of respondents is presented first.

The study set out to answer the following questions:

i. What is the performance level of the Pride Micro Finance in respect to savings

mobilization in rural areas?

ii. What strategies have been employed by pride Microfinance especially in the rural areas

to increase their savings mobilization levels?

iii. What is the relationship between Pride micro finance strategies for savings mobilization

and savings mobilization?

4.1 The response rate of respondents

Out of the 25 target respondents, responses were only got from 20 respondents as illustrated in

Table 4.1 below:

Table 4.1:The response rate of respondents

Responses Frequency Percentage
Answered questionnaires 18 90.0
Unanswered questionnaires 2 10.0
Total 20 100.0
Source: Field data.
Results in Table 4.1 show that out of the sample size of 20, 18 assisted the researcher by

answering the questionnaires.

16
4.2 Demographic characteristics

Table 4.2: Responses by gender

Gender Frequency Percentage
Male 11 61.1
Female 7 39.9
Total 18 100.0
Source: Field data.
Results in Table 4.1 show that the majority of respondents (61.1%) were males compared to

females. This implies that males participated more in the study than females.

Table 4.3: Responses by age

Age group (in years) Frequency Percentage
20-30 10 55.6
30-40 2 11.1
Above 40 years 6 33.3
Total 18 100.0
Source: Field data.

Results in Table 4.3 show that the age group of 20-30 years participated more in the study and

could be due to the fact that pride micro finance employees more of young graduates. However,

these have a little experience in savings mobilization.

Table 4.4: The working positions of respondents

Management Level Frequency Percentage
Top level 3 16.7
Middle level 11 61.1
Lower level 4 22.2
Total 18 100.0
Source: Field data

Results in Table 4.4 show that most respondents were from the middle level management
followed by lower level and then top management. This implies that the information provided
concerning the research topic was in relation to what Pride microfinance uses, applies concerning
the questions that were in the questionnaire. This is because they are involved in the daily routine
operations of the organization and they are updated of the ongoing changes in the organization
hence providing adequate and relevant information.

17
Table 4.5: The period employees have spent in the organization
Period in years Frequency Percentage
Less than a year 9 50
1-2 5 27.8
2-3 1 5.6
3-4 1 5.5
Above 4 2 11.1
Total 18 100.0
Source: Field data.

Results in Table 4.5 show that most respondents have worked for less than a year, followed by

those that have worked for 1- 2 years. These results show that the information was provided by

mainly the newly employed and this presented a problem of them not really having provided

adequate and relevant information since they are new on the job and still under going on job

training to be well versed of the organization.

4.3 The level of savings mobilization in Pride Micro Finance

Table 4.6: Showing the most service offered by Pride Micro Finance
Service Frequency Percentage
Credit/ loans 10 55.6
Deposits/ savings facilities 4 22.2
Pension / social security - 0
Leasing facilities 1 5.6
Insurance services 2 11.1
Others 1 5.6
Total 18 100.0
Source: Field data

Results in Table 4.6 show that most the most service offered by Pride Micro Finance is credit or

loan facilities, followed by deposit facilities, then insurance services. Leasing and other were

rated equally in the forth position. Among others, respondents stated managing fixed deposits

accounts. This implies that Pride Micro finance clients significantly enjoy the services of credit

and deposit facilities. This could be explained by the fair terms and conditions that apply to

credit and good interest rates offered on deposits.

18
Table 4.7: Showing the common form of savings mobilization offered by Pride Micro
Finance.
Form of savings mobilization Frequency Percentage
Securities 0 0.0
Physical assets 0 0.0
Cash 16 88.9
Others 2 11.1
Total 18 100.0
Source: Field data.

Results in Table 4.7 show that most respondents stated that Pride micro finance mobilizes

savings mainly through individual cash, followed by other forms represented by 11.1% and the

other forms of savings included group savings, offering western union services.

19
Table 4.8: Showing factors that affect the level of savings mobilization in Pride Micro
finance
Factors Responses
Strongly Agree Not sure Disagree Strongly Total
agree disagree
frequency 10 6 2 0 0 18
Percentage 55.6 33.3 11.1 0 0 100
Monetary and credit Frequency 6 9 3 0 0 18
polices Percentage 33.3 50.0 16.7 0 0 100
Frequency 4 11 3 0 0 18
Inflation rate Percentage 22.2 61.1 16.7 0 0 100
Number of Frequency 12 6 0 0 0 18
dependents in the 100
clients family Percentage 66.7 33.3 0 0 0
Political Frequency 11 5 2 0 0 18
environment Percentage 61.1 27.8 11.1 0 0 100
Fiscal policies(e.g.) Frequency 8 9 1 0 0 18
taxation Percentage 44.4 50.0 5.6 0 0 100
Source: Field data

Results in Table 4.8 show that the level of income of clients is the most influencing factor to

Pride’s savings mobilization, followed by the number of dependents in the client’s family, then

the political environment. This implies that Pride micro finance has to pay much attention to the

income level of clients, the number of dependants in the household and the political environment

in order to increase their level of savings.

20
Table 4.9: Showing promotional tools used by Pride to promote its
activities
Tools Frequency Percentage
Logos 5 27.7
Media adverts 11 61.1
Brand names 1 5.6
Educational campaigns 1 5.6
Participation in social activities 0 0.0
Others 0 0.0
Total 18 100.0
Source: Field data.

Results in Table 4.9 show that of the above promotional activities used to mobilize savings,

media adverts, logos, brand names and educational campaigns are used by Pride microfinance of

which media adverts is the most promotional activity used. Logos, brand names, educational

campaigns are used at a lesser extent.

Table 4.10: Showing strategies used by Pride micro finance to

mobilize savings
Factors Responses
Strongl Strongly Total
Offering a wide y agree Agree Not sure Disagree disagree
rage of financial frequency 11 7 0 0 0 18
instruments Percentage 61.1 38.7 0 0 0 100
Promotions of Frequency 10 8 0 0 0 18
Pride Activities Percentage 55.6 44.4 0 0 0 100
Introduction of Frequency 9.0 9 0 0 0 18
new products Percentage 50.0 50.0 0 0 0 100
Education and Frequency 6 12 0 0 0 18
sensitization Percentage 33.3 66.7 0 0 0 100
Improvement of Frequency 0 2 0 0 16 18
customer services Percentage 0 11.1 0 0 98.9 100
Extension of Frequency 0 0 0 0 18 18
working hours Percentage 0 0 0 0 100 100
Source: Field data

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Results in Table 4.10 show that the most strategies used by Pride micro finance to mobilize

savings in order of importance are; offering a wide rage of financial instruments, promotion of

Pride activities, introduction of new products and education and sensitization of its clients.

Table 4.11: Showing the effectiveness of some of the

strategies used by Pride micro finance to mobilize savings
Total
Effective Not effective Not sure
Wide spread and frequency 18 0 0 18
Accessible network Percentage 100 0 0 100
Extension of Frequency 0 18 0 18
working hours Percentage 0 100 0 100
Introduction of new Frequency 18 0 0 18
products Percentage 100 0 0 100
Source: Field data

Results in Table 4.11show that widespread and accessible network and introduction of new

products are the most effective strategies in mobilizing savings compared to the extension of

working hours. Extension of working hours has not been used. Therefore Pride needs to also pay

much attention on the extension of working hours to allow business people deposit their money

in the bank and the end of the working hours. This is so because most businesses close late in the

evening at around 6pm. This may require operations until this time in order to capture these

deposits hence a strategy that could be used to increase on their level of savings mobilized.

4.5 Relationship between Pride micro finance strategies for savings mobilization and

savings mobilization

The relationship between pride micro finance activities and savings mobilization was determined
using spear man rank correlation coefficient. It is given by the formula:

22
Where

P the correlation coefficient

d2 is the difference between items squared

n is the number of item being correlated.

Table 4.12:
Computing the relationship between Pride micro
finance strategies for savings mobilization and savings
mobilization
Savings
Strategies mobilization Rx Ry Rx-Ry =d d2
Offering a
wide rage of
financial
instruments Credit/ loans 1 1 0 0
Promotions Deposits/
of Pride savings
Activities facilities 2 2 0 0
Introduction Pension /
of new social
products security 3 6 -3 9
Education
and Leasing
sensitization facilities 5 3 2 4
Improvement
of customer Insurance
services services 4 4 0 0
Extension of
working Others (fixed
hours deposits) 6 5 1 1
Total 15
Source: Field data.

Hence p =1-6x15/6(62 -1)

= 0.571

Results in Table 4.12 show a positive moderate relationship between savings mobilization
strategies employed by Pride micro finance and savings mobilization. That is savings
mobilization strategies employed by pride accounts for only 32.7% (0.5712 x100) of savings
mobilization in Pride micro finance in rural areas. This shows that their level of savings

23
mobilized is low so to increase savings the strategies of extension of working hours, participation
in social activities and education campaigns should be strengthened and put in place.

24
 CHAPTER FIVE

Discussion of Main Findings, Conclusions and Recommendations

5.1 Introduction
In this chapter, a summary of findings, conclusions and recommendations are presented in

accordance with research questions. The research questions answered were:

The study set out to answer the following questions:

The study set out to answer the following questions:

i. What is the performance level of the Pride Micro Finance in respect to savings

mobilization in rural areas?

ii. What strategies have been employed by pride Microfinance especially in the rural areas

to increase their savings mobilization levels?

iii. What is the relationship between Pride micro finance strategies for savings mobilization

and savings mobilization?

5.2 Discussion of main findings

The study aimed at examining the role of financial institutions in savings mobilization as in the

case of Pride Microfinance Uganda Ltd. Findings about the performance level of Pride

Microfinance in respect to savings mobilization in the rural areas revealed a low level of

performance. Most of the savings are in form of property, but not in form of assets managed by

Microfinance. This is explained by the fact that savings mobilization strategies employed by

pride accounts for only 32.7% of savings mobilized by pride microfinance in rural areas, (field

data, 2011).

The strategies employed by Pride Microfinance in the rural areas to increase their savings

mobilization included offering a wide range of financial instruments, promotion of pride

activities, introduction of new products, education and sensitization of clients about savings

25
mobilization. Although these strategies are dynamic and aggressive to encourage savings by

enhancing public confidence, the earlier studies of Bagonza (2001), savings mobilization has still

remained low for Pride Microfinance in rural areas. This low savings mobilization is explained

by the fact that although Pride is a microfinance deposit taking institution, most of the

microfinance institutions are just filing the gap left by formal institutions if they allowed to

mobilize savings, the earlier studies of Kasekende, (1998).

Despite the fact that savings mobilization in the rural areas is still low, for the case of Pride

Microfinance, their intermediation in savings mobilization has promoted the strengthening of the

funding base for microfinance and the basis for a competitive, efficient and sound microfinance

industry, (AFI, 2010).

The system of financial intermediation can affect economic performance and growth directly

through the role it plays in savings mobilization. Pride Microfinance has played this vital role of

savings mobilization especially in the rural areas although the level of savings is still low. It

offers various savings accounts and it’s a deposit taking institution. It has facilitated the growth

and empowerment of women who have been beneficiaries because it offers a wide range of

appropriate instruments. According to Winiwiski, (1999) financial instruments play a vital role in

facilitating savings because of appropriate instruments.

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5.3 Conclusion
From the study findings, it can be concluded that:

The performance level of Pride micro finance in respect to savings mobilization is still very low

given that most clients are interested in investing in real property than in cash form. The

strategies employed by Pride Micro finance in mobilization of savings are lacking in that they

don’t include important ones such as customer care and extension of working hours where

necessary. The savings mobilization for Pride micro finance is low due to lacking savings

mobilization strategies.

5.4 Recommendations

i. At the corporate level, Pride micro finance needs to improve its strategies for savings

mobilization to include improvement in customer care such as improving working hours

where necessary.

ii. Extension of working hours until 6pm. Since most of their savers are mainly business

people and their working hours closure of the day’s business is normally in the evening at

around 6pm working hours until such a time gives them the opportunity to deposit their

money in the bank since they are operating until such a time.

5.5 Area for further research

Government policy and savings mobilization strategies by financial institutions in the rural areas;

that’s to say the strategies employed should encourage savings and improve their standards of

living.

27
REFERENCES

Alwisniwiski, H, (1995), Challenges of Micro savings. Deutsche Gessellch Mobilization concepts

and views from the Fur field, Internet.

Bagonza G, (2001), Have the banks Mobilization Strategies led to disintermediation of savings,

The Uganda Bankers Vol. 9 No. 1. Uganda Institute of Bankers.

Finscope Uganda, (2009), Results of a National Survey On Demand, usage and Access To

Financial Services In Uganda, Final report. The Uganda Institute of Bankers Library.

Graham Wright, (1999), The case for voluntary, open access savings facilities and why

Bangladesh’s largest MFIs were slow to react, Uganda Institute of Bankers Library,

332.0415 WRI.

Kasekende L, (1998), Savings in the context of Macro Economic Policy Issues. The East Africa

Experience. www.gtz.de/dokumente/bib/98-1494

Levine Ross, (2005), Finance and Growth: Theory and Evidence, in Philppe Aghion and Steven

Durlayf, eds. Handbook of Economic Growth. The Netherlands: Elsevier Science, Uganda

Institute of Banker Library.

Marguerite Robinson, (2011), Savings Mobilization as a Financial Instrument and its Relevance

for the poor. http://www.worldbank.org/financial/assets/images/mtp

Matovu J.M, (2010), Domestic Resource Mobilization in Sub–Saharan Africa, the case of Uganda.

www.dfid.gov.uk/R4D/PDF

Mpuga P, (1999), Savings Mobilization in Uganda, Journal of Capital Markets Authority Vol. 3.

No. 1

28
Mukwanason H, (1994), Interest Policy and Savings Investment Process a policy stance. The

Uganda banker Vol. 5. No. 1. Uganda Institute of bankers.

Rani D, (2007), Country level Savings Assessment tool, Uganda Institute Of Banking And

Financial Services Limited.

Ross H, (2005), Finance and Growth: Theory and Evidence in Philippe, Uganda Institute of

Bankers Library.

Rutherford S, (2001), The poor and their money. Oxford University press, Uganda Institute of

Bankers Library.

29
 QUESTIONNAIRE

TO BE ANSWERED ON THE ROLE OF FINANCIAL INSTITUTION IN SAVINGS

MOBILIZATION

Dear respondent.
This questionnaire is aimed at collecting data for the above research topic. The study will not
be used for anything other than for academic purposes and will be treated with
confidentiality.
Please tick as appropriate
A. Demographic characteristics.
1. What is your Gender status?
a) Female b) Male
2. What is your age range?
a) A bove 4o years
b) 30-40 Years
c) 20-30 Years
3. How long have you been employed in this organization?
…………………………………………………………………………………………..
4. What is your working position level?
a) Top level
b) Middle level
c) Other

B. Savings mobilization
5. Which services do your offer to customers?
a) Credit loans
b) Deposits /Savings facilities
c) Pension / Social security
d) Leasing facilities
e) Insurance services
f) Any other please mention ………………………………………….

30
 6. Which form of savings does your organization offer to clients?
a) Securities
b) Physical assets
c) Financial Assets (cash)
c) Others…………………………..
7.To what extent do you agree that the following factors affect your clients levels of
performance in savings.

Strongly Agree Not sure Disagree Strongly

Agree Disagree
a)Level of
income
b) Monetary
and credit
policies
c)Inflation rates
d) Number of
dependants
E0Political
instability
f) Fiscal
policies (eg.
Taxation)
Others please specify………………………………………
……………………………………………………………………………………….
8. Which promotional activities does pride use to promote its activities?
a) Logos
b) Media advertisement
c) Educational campaigns
d) Brand names
e) Participation in social Activities
Others please specify……………………………........................................................
…………………………………………………….

C. Role of pride microfinance

31
9. To what extent to you agree that pride uses the following strategies to mobilize savings?
Strongly Agree Not Sure Disagree Strongly
Disagree
a) Offering
a wide rage
of financial
instruments
b)
Promotions
of Pride
Activities
c)
Introduction
of new
products
d) Education
and
sensitization
e)
Improvement
of customer
services
F)Extension
of working
hours

10. How effective have the following strategies been in mobilizing savings?
Effective Not Effective Not Sure
a) Wide spread and
accessible network
b)Extension of
working hours
c)Introduction of
new products

11. What strategies are being employed to improve rural areas in savings mobilization?
…………………………………………………………………………………..............

32