MICROFINANCE SERVICES AND GROWTH OF SMALL ENTERPRISES

CASE STUDY: MAKINDYE KAMPALA

BY

TUMALU MATILDA

02/00315/124291

A RESEARCH PROPOSAL SUBMITTED TO THE SCHOOL OF BUSINESS

AND MANAGEMENT IN PARTIAL FULFILMENT OF THE
REQUIREMENTS FOR THE AWARD OF BACHELORS
DEGREE IN BUSINESS ADMINISTRATION
AT CAVENDISH UNIVERSITY UGANDA

JULY 2014

1
 DECLARATION

I declare that this research proposal is my original work and has not been presented for

examination in any other University.

TUMALU MATILDA

02/00315/124291

Signature…………………….

Date …………………..............

2
 APPROVAL

This is to certify that this research proposal was conducted under my supervision and

guidance and was submitted to the school of business with my approval.

Signature ……………………………

HOJOPS ODOCH

DATE …………………/…………………../…………………

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 ACKNOWLEDGMENT

My gratitude first goes to God who has given me the strength to undertake this research.

I would like to express my sincere thanks to my parents for the financial support and care,

accorded to me throughout this success in which without them I wouldn’t be what I am.

I also owe a lot of appreciation to all those who assisted me in carrying out this research. I am

grateful to my supervisor who helped me through giving me the right guidance, advice and

assistance concerning the best way of doing and completing my research.

Thanks also go to all those lecturers who imparted professionalism into my work.

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 Table of Contents
DECLARATION i
APPROVAL ii
ACKNOWLEDGMENT iii

CHAPTER ONE 1
INTRODUCTION 1
1.1 Background of the study 1
1.2 Statement of the problem 4
1.3 Purpose of the study 4
1.4 Specific objectives 4
1.5 Research questions 5
1.6 Scope of the study 5
1.6.1Geographical Scope 5
1.6.2 Content Scope 5
1.6.3Time Scope 5
1.7 Significance of the Study 5
1.8 Conceptual frame work 6
Figure 1: Conceptual Framework 6
CHAPTER TWO 8
REVIEW OF RELATED LITERATURE 8
2.0 Introduction 8
2.1 Theoretical Review 8
2.2 Microfinance 9
2.3. Small enterprise development 11
CHAPTER THREE 13
METHODOLOGY 13
3.0 Introduction 13
3.1 Research design. 13
3.2 Research Population. 13
3.3 Sample size 13
Table1. Population and sample size table. 14
3.4 Sampling procedures 14
3.5 Research Instruments 15

5
3.5.1 Questionnaires 15
3.6 Validity and Reliability of the instruments 15
3.6.1 Validity 15
3.6.2 Reliability 16
3.7 Data Analysis 16
3.8 Ethical considerations 16
3.9 Limitations of the study. 16
References 17

APPENDIX I: QUESTIONAIRE 20
DEMOGRAPHIC CHARACTERISTICS OF THE RESPONDENTS 20
PROPOSED BUDGET 25
Appendix III: Time frame 26

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 CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter presents the background of the study; statement of the problem; purpose of the
study, specific objectives, research questions, research hypotheses, scope of the study,
significance of the study, and the operational definitions of the study.

1.1 Background of the study

It is the dream of every country to have an economy that is self sustaining; with yet in Africa
poverty is the heart of its problems especially in sub-Saharan Africa. In Uganda poverty has
been increasing at the rate of 2.5% every year since 2004 due to higher increase in
population, Corruption of some big members of government, lack of social services like
transports and communication to some part of the country etc. Increase in poverty has caused
many problems like increase in environmental destructions, low income to the people
especially central part of the country and poor economic-social empowerment. (PEAP; 2007)

Beginning in the late 1970’s some highly inventive non- profit making agencies and banks
pioneered techniques to issue loans to the self-employed who know their trade well, but lack
conventional means to secure a loan. Micro-finance institutions (MFI’s) as these innovations
are now called, have prospered in some of the poorest countries of Africa, Latin America and
Asia.

The financial system in Uganda is composed of formal, semiformal and informal institutions.
The formal institutions include banks, Microfinance Deposit-taking institutions, Credit
Institutions, Insurance companies, Development Banks, Pension Funds and Capital Markets.
The semi informal institutions include Savings and Credit Cooperative Associations
(SACCO) and other Microfinance institutions, whereas the informal ones are mostly village
savings and loans associations (B O U, 2005). Formal institutions are less prominent in rural
areas than urban areas and they only serve 14% of the rural population. Informal institutions
play an important role in the rural service provisions and serve approximately 12% of the
rural population.

In Uganda, micro-finance institutions started early 1986 aiming at provisions of micro credit
and savings services to low income earners but economically active poor. Generally the
7
focuses on the group already engaged in one or several small scale activities, clients borrow
and invest in their activities, repay their loans and borrow again. There are so many
microfinance institutions operating in Uganda, the most prevailing are PRIDE and FINCA
which provide credit and savings to the poor people without collateral (Kaplan & Norton,
1992)

By early the 1990s, the banking sector was comprised mainly of four foreign banks (Standard
Chartered, Standard Bank, Barclays and Baroda), and the two large indigenous banks (UCB
and Co-op) that controlled 70 percent of the banking assets and liabilities but were
insolvent. By the end of 2005, the system had substantially grown and was made up of a
formal and an informal sector. The number of commercial banks increased to 20 in 1996,
when a moratorium on banking licenses was imposed and after the closure of some banks and
consolidation, fell to 15 (B O U, 2005).

Microfinance is the provision of finance services to low income clients including consumers
and the self employed that traditionally lack access to banks and related services (Nuwagaba,
1997). Microfinance institutions are therefore institutions that provide finance services to low
income earners who lack access to banks and banks related services (Georgina, 2001).

According to Garner(1996) the object of microfinance institutions is a world in which as

many poor and near poor households as possible have permanent access to an appropriate rate
of high quality services, including not just credit but also savings, insurance and fund
transfers, those who promote microfinance institutions have believed that such access of
poor or near poor people to an appropriate rate of high quality financial services of credit and
savings will help poor people out of poverty and lead to rural development ( Agarwal, 1990).

This study is based on Theory of Change (TOC)-based approach to M&E, impact assessment
by Weiss, C.H. (1995). The classic microfinance theory of change is simple: poor person
goes to a microfinance provider and takes a loan (or saves the same amount) to start or
expand a micro enterprise which yields enough net revenue to repay the loan with major
interest and still have sufficient profit to increase personal or house hold income enough to
raise the person’s standard of living.

The theory of change provides a model of how a program or business can be supported and
led to growth through proper financial support that increases performance of small business.

8
In other words it provides a road map of the development of a small business to a large
productive business.

The study will also be guided by the principal agent / cooperate social responsible theory
(P/A Theory & CSR) in global value chains. In this theory, practitioners and are increasingly
aware that doing the right things is not just a matter of being profitable. The ethics of
business activities are becoming increasingly important, and more and more companies are
evaluated on their ability to meet not only the customers’ needs but also the various needs of
employees, NGOs, representatives of the local community and other interest groups. The
globalization of economic activities has undoubtly affected this development. When part of
the value chain is in different geographic, cultural and institutional settings, differences in
social and environmental standards are uncovered.

The major concepts that will appear in this work will be concerned with the microfinance
services and the level of growth of small scale enterprises. According to Georgina, (2001)
Microfinance is understood as small and adapted financial services for poor and low-income
populations and micro, small, and sometimes medium-sized enterprises. They may or may
not have limited access to mainstream financial services. Microfinance institutions are
therefore institutions that provide finance services to low income earners who lack access to
banks and banks related services.

Small enterprises are one the other hand defined as normally privately owned corporations,
partnerships, or sole proprietorships that are operating on a small scale. Small business
owners are responsible for managing all aspects of their company and provide the necessary
capital for the survival of such businesses (Ddumba Ssentamu, 2000). The growth of small
enterprises is referred to as the quantitative increase in the size and level of productivity or
operations of a business.

Micro finance has been a major strategy adopted by many developing countries as a way of
enhancing growth and development of small business. Developing countries have always
been challenged with the problem of unemployment caused as a result of having many
dependants chasing the few available jobs. Through following the need for reforms as stated
in the world bank report 1996 regarding reforms in developing countries, many strategies
such as expanding the informal sector where most of the people are meant to create their own
small businesses as this will reduce unemployment and also lead to development.

9
The creation of the small businesses however require funding for expansion and increase in
the level of productivity and growth, this therefore means that creation of micro finance
institutions where people can access small loans or funding to take their businesses to the
next level would be the best strategy of expanding these businesses (Georgina, 2001).

1.2 Statement of the problem

Many critics of microfinance institutions had asserted that microfinance does not have the
power to simple handedly defeat poverty and enhance the growth and development of small
enterprises. The lack of documented evidence measuring and monitoring the impact of
microfinance institutions towards small scale business growth and development had been the
source of considerable criticisms. This is because many people in the developing countries
like Uganda where micro finance institutions are meant to effectively operate have not
participated or used these institutions.

The proposed study therefore aims at examining the role of microfinance towards small scale
enterprise growth development taking Makindye town in Kampala Uganda as the area of
study. It is hoped that the study results will shade some light on the role of microfinance
institutions played towards small scale enterprise growth. Possible solutions to improve the
role microfinance institutions played towards small scale enterprise development will be
suggested whereby if implemented would cause greater small business development
emanating from microfinance institution.

1.3 Purpose of the study

To establish the impact micro finance institutions towards the growth and development of
small scale enterprises in Makindye Kampala

1.4 Specific objectives

The following are the specific objectives of this study
I. To examine the spread and performance of micro finance institutions in Makindye
Town in Kampala
II. To examine the level of growth of small enterprises in Makindye Town in Kampala
III. To establish the impact of microfinance institutions towards the growth of small
enterprises in Makindye Town in Kampala.

1.5 Research questions

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The study will seek to answer the following questions

I. What is the level of spread and performance of micro finance institutions in Makindye
Town in Kampala?

II. What is the level of growth of small scale enterprises in Makindye Town in Kampala?

III. What is the impact of microfinance institutions towards the growth of small
enterprises in Makindye Town in Kampala?

1.6 Scope of the study

1.6.1Geographical Scope

The proposed study area is Makindye Town in Kampala. The area is located in outside parts
ok Kampala town with high population and easy accessibility with a lot of small scale
enterprises and microfinance.

1.6.2 Content Scope

The proposed study content is basically involved with finding out the roles of microfinance
institutions towards the growth and development of small enterprises, the study will focus on
finding out the number of micro finance institutions their performance correlated with the
level of growth of small enterprises in the selected area.

1.6.3Time Scope

The proposed study will be conducted with a period of five months (5) to effectively gather
the information that effectively meets the study objectives. The stud shall base on the data
from 2005 to date as the most relevant data for better analysis and comparison purposes.

1.7 Significance of the Study

With the study on small scale development through use of microfinance institutions, the
researcher hopes that the study will form a basic material to the following beneficiaries:

The information will be useful for planners and decision makers in different institutions
dealing with microfinance program .The findings and recommendations will also be useful to
small scale enterprise managers in determining the usefulness of microfinance towards
development and growth of their enterprises.

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The academicians will also use the findings of this study to embark on a related study. In
other terms, the study findings in this research will act as reference for other future
researchers

The researcher will also acquire necessary skills of data collection, interpretation, analysis
and discussion and this will help him in carrying out similar research in future and to enable
him getting the award of other degrees related to accounting and finance.

1.8 Conceptual frame work

Figure 1: Conceptual Framework

Independent Variable Dependent Variable
Small enterprise growth
Microfinance institutions

 Loans provision  Expansion of operations

 Increased productivity
 Interest rates
 Increased profits
 Advisory services
 Increased decision making
 Training efficiency

Intervening factors

 Economic factors
 Government intervention
 taxation

The above conceptual frame work describes the relationship between the independent
variable and the dependent variable. The frame work further presents the intervening factors
that can also impact or determine the dependent variable.

The performance of microfinance institutions is the independent variable and this involves
factors such as provision of loans, the interests rates, advisory services and training to people
to enable to effectively use these funds. The services provided by the microfinance
institutions determine the growth and development of small enterprises. This therefore means
that the growth of the small enterprises depend on the services delivered by microfinance

12
institutions and the growth is expressed in terms of size of the enterprise, level of profits,
efficiency and increase in the level of productivity.

According to the frame work, the small enterprise is not only impacted on by the services of
microfinance institution but also impacted on by other factors such as the government factors
like taxation and economic factors which are essential determinants of the success of
activities.

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.0 Introduction

The following chapter elaborates the theoretical review of the research and reviews literature
on the study. The presents concepts, opinions and ideas on microfinance and performance of
small scale enterprises and the second part reviews related studies

2.1 Theoretical Review

This study is based on Theory of Change (TOC)-based approach to M&E, impact assessment
by Weiss, C.H. (1995). The classic microfinance theory of change is simple: poor person
goes to a microfinance provider and takes a loan (or saves the same amount) to start or
expand a micro enterprise which yields enough net revenue to repay the loan with major

13
interest and still have sufficient profit to increase personal or house hold income enough to
raise the person’s standard of living.

The theory of change provides a model of how a program or business can be supported and
led to growth through proper financial support that increases performance of small business.
In other words it provides a road map of the development of a small business to a large
productive business.

According to Weiss, C.H. (1995), the idea of the ToC approach seems to have first emerged
in the United States in the 1990s, in the context of improving evaluation theory and practice
in the field of community initiatives. Yet the “current evolution draws on two streams of
development and social program practice: evaluation and informed social practice (Vogel,
I.2012). From the evaluation perspective, ToC is part of broader program analysis or
program theory.

In the development field, it also grew out of the tradition of logic planning models such as the
logical framework approach developed from the 1970s onwards. The notion of developing
informed social practice has a long history; practitioners have often sought (and used) tools to
attempt to consciously reflect on the underlying theories for development practice (James,
Cathy. 2011).

The study will also be guided by the principal agent / cooperate social responsible theory(
P/A Theory & CSR) in global value chains. In this theory, practitioners and are increasingly
aware that doing the right things is not just a matter of being profitable. The ethics of
business activities are becoming increasingly important, and more and more companies are
evaluated on their ability to meet – not only the customers’ needs but also the various needs
of employees, NGOs, representatives of the local community and other interest groups. The
globalization of economic activities has un doubtly affected this development. When part of
the value chain is in different geographic, cultural and institutional settings, differences in
social and environmental standards are uncovered.

2.2 Microfinance

Microfinance institution is an institution that provides financial service to low income clients
who would traditionally lack access to banks and related services, (Georgia, 2001). A bank
on the other hand is an organization usually a corporation/ chartered by a state or federal

14
government which does most deposits and time deposits and honors’ instruments drawn on
them, and pays interest on them; discounts notes, makes loans and invests in securities;
collects checks, drafts and notes; certificates depositors checks; and issues, drafts and
cashier’s checks, (Rukol, 2005).
Microfinance is often defined as financial services for poor and low-income clients. In
practice, the term is often used more narrowly to refer to loans and other services from
providers that identify themselves as \microfinance institutions. (MFIs). These institutions
commonly tend to use new methods developed over the last 30 years to deliver very small
loans to unsalaried borrowers, taking little or no collateral. These methods include group
lending and liability, pre-loan savings requirements, gradually increasing loan sizes, and an
implicit guarantee of ready access to future loans if present loans are repaid fully and
promptly.
In addition to the definition above, Azevedo‘s (2007) adds another dimension: the rationale
for the provision of microfinance services. ‗The term microfinance refers to the provision of
financial services for low-income households and micro entrepreneurs (both urban and rural)
for productive purposes‘ (ibid: 301). However whether microfinance is always provided for
productive purposes is debatable

According to Garner(1996) the object of microfinance institutions is a world in which as

many poor and near poor households as possible have permanent access to an appropriate rate
of high quality services, including not just credit but also savings, insurance and fund
transfers, those who promote microfinance institutions have believed that such access of
poor or near poor people to an appropriate rate of high quality financial services of credit and
savings will help poor people out of poverty and lead to rural development ( Agarwal, 1990).
Through micro finance, many businesses have now tried to stabiles in all parts of Kampala
and towns have also grown which has boosted trade in areas like Makindye, kansanga in
Kampala. The growth of the country in terms of production has also increased and today the
county has joined international trade with other countries as well as joining other
international integrations.

Microfinance has gained global acclaim as an important poverty reduction tool in many
developing countries (Johnson and Rogaly, 1997; Gibbons and Meehan, 2002; Armendariz
de Aghion and Morduch, 2005; Copestake, Greeley, Johnson, Kabeer and Simanowitz 2005;
Bakhtiari, 2006). According to Morduch (2000), few recent innovations have held much hope

15
for reducing poverty in developing countries as microfinance. Indeed microfinance is
perceived as a crucial driving mechanism towards achieving the millennium development
target of halving extreme poverty and hunger by 2015 (Simanowitz, 2002; Fernando, 2004;
Arun, Imai and Sinha, 2006). Mohammed Yunus1 even described microfinance as a human
right. According to leading advocates in the field, microfinance has the capacity to efficiently
and effectively provide sustainable financial services to poor households who are otherwise
excluded from the conventional financial systems for lack of collateral. Casting aside the
euphoria on microfinance, a sober question can be asked does microfinance really reduce
poverty through enhancing investment in small enterprise?

They portray the common conception of microfinance: financial services that formal
institutions provide for the poor. Seibel (1999) and Wright and Rippey, (1999) challenge
these definitions and argue for a more inclusive view of microfinance. They contend that
microfinance should be more inclusive and should take into consideration informal financial
arrangements such as moneylenders and financial support from relatives which constitute an
important source of financial assistance for the poor. Although informal financial services are
technically part of microfinance, the term is generally known and used to refer to the
provision of financial services to the poor by formal institutions such as the Grameen Bank,
BRAC and FINCA. Some scholars prefer to use the term ‗institutional microfinance‘ to refer
to microfinance excluding informal financial services. For instance, when Robinson (1995)
advocates the movement of microfinance away from subsidised credit to financial
intermediation on commercial basis, it is with reference to financial services provided by
formal institutions.

The Consultative Group to Assist the Poorest (the apex association of international donors
who support microfinance) regards microfinance as ―a powerful tool to fight povertyǁ that
can help poor people to raise income, build their assets and cushion themselves against
external shocks. (CGAP, 2004a:1). Microfinance is defined here in relation to its users -
rather than in relation to other forms of finance - as the supply of savings, credit, insurance
and payment services to relatively poor people.

2.3. Small enterprise development

Small enterprise Development according to Henkin (1997) is a progress of positive change

quantitatively and qualitatively of a business.

16
According to Henkin (1997) many people define it in their own context according to thin
surroundings and immediate needs; the definition in Africa may not be the same as in Europe
but there are key components of the definitions that are similar everywhere. According to
Dee (2002), small enterprise development is a process by which a business owner is inspired
through their institutions in ways that enhance their ability to mobilize and manage resource
sustainability to produce sustainable and justify distributed in procumbent in their quality of
life consistent with their aims and aspirations.

Small enterprises in Makindye are in rural poor areas comprised of farmers, farmers groups
and enterprises have very little collateral (Johns tone, 2002) and no formal credit history (
Black, 2001) and are thus considered risky investments by traditional banking institutions, (
Malindini, 2004). Microfinance institutions help family farms for rural poor farmers and
farmer groups as well as rural enterprises overcome this challenge to running their operations
and building their assets through a variety of creative financial solutions, (Ongwen, 1994). In
Mongolia for example microfinance institutions have helped fund 460 loans totally more than
$1.2. Million; half have been repaid in fall, (Machili, 2001). In Guatemala 4000 farming
households are farming 50 villages, banks to increase access to credit. (GMFP, 2002).

In Nepal, mercy corps (an NGO) institution expect to read 10,000 clients especially women
and the read 10,000 clients especially women and poorest households by teaming with the
country’s largest microfinance providers to expand financial services in remote area and
develop savings and loan products for agriculture, (mercy Corps, 2004). In Ethiopia the
microfinance ministry plans to expand financial services into never, served areas potentially
touching tens of thousands of farming and related agribusinesses, (EMMF, 2004). However,
all these researches did not put any emphasis on Uganda the country of this study. There
could be other ways microfinance institutions lead to rural development in Uganda thus the
need for this proposed research. Weine, (1991) has also stated that at microfinance
institutions provide small scale enterprise loans like agricultural loans are available for a
multitude farming purposes. According to Whyte (1986) farmers may apply for loans to buy
inputs for the cultivation of food grain crop as well as for horticulture, aquaculture, animal
husbandry, and floriculture and sericulture business.
According to Perpin Strup (1960), there are also special loans to finance the purchase of
agricultural machinery such as tractors, harvesters at microfinance institutions. Lwakatare
(2004) has also stated that at microfinance institutions construction of biogas plants and

17
irrigation systems as well as the purchase of agricultural land may also be financed through
special types of agricultural finance. There is need to find out how rural agricultural farmers
in Uganda use the loans they borrow which is another reason for the proposed research.

According to Smillie, (1995) also there are currently a few social interventions that have been
combined with micro financing including the increase of HIV/AIDS awareness. According to
Smillie, (1995) an example of this is seen in Botswana where there is the intervention of
microfinance in issues like AIDS and equity which is a participatory program that advocates
on different gender roles. Gender based violence (GBV), and HIV/AIDS infections to
strengthen the communication skills and leadership of women.

Also, According to Willets (1996). Microfinance has been combined with other social
interventions of business education and with other packages of health interventions that have
led to small enterprise development. (Retus, (1995) has cited that innovation for poverty
action program me of Peru where borrowers randomly received financial training as part of
their borrowing group meetings such interventions by microfinance institutions leading up to
small enterprise development.

CHAPTER THREE

METHODOLOGY

3.0 Introduction
This chapter outlines the methods adopted in order to answer the research questions detailed
in chapter one. It looks at the research design, research population, sampling techniques, data
collection instruments and procedure of data collection, mode of data analysis and
presentation as well as ethical consideration and limitations of the study.

3.1 Research design.

The research was a descriptive cross sectional survey design where data was collected from a
cross the population at one point in time. This design is cheap, less time consuming and easy
data collection and analysis (Amin 2005). Both qualitative and quantitative data collected
were used during the data collection.

3.2 Research Population.

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The target population of this study will consist of 80 respondents having small scale
enterprises and those working in the micro finance enterprises. 50 respondents shall be form
the small enterprises in Makindye Town while the 30 respondents shall be from the
microfinance institutions.

3.3 Sample size

Slovene’s formula will be used to compute the sample size. This formula will be employed
so as to sample fairly a large size as representation of the total population such that the
research findings obtained can be considered valid. The details on the determination of
sample size using Slovene’s formula are shown below;

By using Slovene’s formula (=N

1+ (e) 2

n= sample size

N= population size

e =level of significance

n=80

1+0.2

n=80/1. 2=66.66=67

Sample size for small enterprises respondents

n=50 X 80=2= 42
80

Sample size for microfinance enterprises

n=30x67=25
80

Table1. Population and sample size table.

Categories Population Sample size

Small scale enterprises 50 42

19
Microfinance institutions 30 25
Total 80 67
Source field

3.4 Sampling procedures

This study will use a technical of stratified random sampling .The respondents of this study
are divided into two categories 5o work in small scale enterprises, 30 work in microfinance
institutions

3.5 Research Instruments

This study will use questionnaires, guided interviews, guided observation, and record sheets
.This is because of the nature of data to be collected, the time available, as well as by the
objectives of the study. The overall aim of this study is to evaluate the relationship between
microfinance and growth of small enterprises in Makindye. The researcher will be concerned
with views, option, perception and feelings from the environment. Such information will be
corrected through the questionnaires, and interviews, and because the study will be conversed
with variable that cannot be directly observed.

The sample size is also quite large, and given the time constraints and target population is
literate and unlikely to have difficulties in responding to questionnaire items, questionnaire is
ideal tool for collecting data.

3.5.1 Questionnaires
Questionnaires will be used to determine: the level on the performance of microfinance
institutions on growth of small enterprises in Makindye Town. The questionnaires will be
self- administered and closed ended so as save time and enable respondents to give relevant
choice since different options will be given. This method of data collection is preferred for
this study because it gives freedom to respondents to give their truthful opinions since there
will be no one to challenge their answers as it is in the case of interviews. This will give a
complete confidence to respondents to effectively answer questions asked without feeling shy
or being scared. The scoring system of this instrument will be based on the five scales or
Likert type scale of rating involving: 1=very low, 2= low, 3= moderate, 4= high, 5= very
high.

3.6 Validity and Reliability of the instruments

20
3.6.1 Validity
To insure the validity of the questionnaire and interview guide; some two experts in research
will be involved. In this regard, after constructing the questionnaires and interview guide,
they will be submitted to two experts to ensure their validity through their duties ‘basis. This
will be based on alpha coefficient value of 0.7 and more. Thus, after the expert judgments,
the compilation of the responses from raters will be computed to determine the content
validity index (CVI). If the coefficient computed is from 0.7 and above, the instruments shall
be considered to be valid but if it is less, the instruments shall be considered to be invalid so
new ones shall be made.

3.6.2 Reliability
To ensure the content reliability, the research will use either the test -retest method or cron
batch alpha, method for the two tests, results will be analyzed using peason’s correlation
coefficient (PLCC) and the T-test for PLCC if the significance will be equal or inferior to
0.05 then instrument will be reliable for T test, if significance will be equal or greater than
0.05, the instrument will be reliable.

3.7 Data Analysis

During this process of data analysis, the researcher will use frequencies and percentage
distribution to analyze data on profile of respondent .Mean and standard deviation will be
used to determine the level of performance of small enterprises Makindye Kampala.
Items/respondents answer analysis will help to demonstrate strength and weakness of
respondents on the microfinance and growth of small enterprises in Kampala.

Numerical values and the interpretation will be used to interpret the response based on the
mean score, for each item question both microfinance and growth of small enterprises in
Kampala.

3.8 Ethical considerations

The researcher will seek for authorization from potential respondents. The researcher will
ensure free will consent from participants. The names or identifications of the respondents
will be anonymous and information collected from them treated with utmost confidentiality.

3.9 Limitations of the study.

The researcher was affected by the following challenges during the study.

21
It will be hard to find the right respondents willing to provide accurate required information
concerning their company since the study involves the need for some vital information
concerning the company.

The research will be tire some because it will be hard to fix the researchers plans in to the
plans of respondents who were always busy doing their work.

References

Adams, Dale W. and Von Pischke, J.D. (1992): ‘Microenterprise credit programs: déjà vu’,
in: Economics and Sociology World Development, Vol. 20, No. 10, 1463-70.

Adams, Dale W., Graham, Douglas W. and Von Pischke, J.D. (eds.) (1984): Undermining
rural develop-ment with cheap credit, Boulder: Westview Press.

Agarwal (1990): Credit for all. Earth scans publications Ltd, London, England.

Ahmed, Shahnaz, Mbaisi, Jane, Moko, Daniel and Ngonzi, Ancent (2005): ‘Health is Wealth:
How Low-Income People Finance Health Care’, in: Journal of International Development,
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APPENDIX I: QUESTIONAIRE

DEMOGRAPHIC CHARACTERISTICS OF THE RESPONDENTS

Gender (Please Tick):

(1) Male

(2) Female

Age

Qualifications Under Education Discipline (Please Specify):

(1) Certificate_______________________
(2) Diploma _______________________

(3) Bachelors ______________________

(4) Masters ______________________

(5) Ph.D. _______________________

Other Qualifications other than education discipline ___________________

Number of Years Working Experience (Please Tick):

(1) Less than/Below one year
(2) 1- 2yrs

(3) 3-4yrs

(4) 5-6yrs

(5) 7 years and above

25
What type of business do you have?
a) One or sole proprietorship business
b) Partnership

c) Limited Company

Section B

Performance of microfinance services

Instruction: Honestly indicate or show your opinion regarding the level of microfinance
services in your area. Tick the right number corresponding with each item key: 1=very low,
2= low, 3=moderate, 4= high; 5= very high.

Micro finance services

There are many micro finance institutions in Makindye Kampala. 1 2 3 4 5

Microfinance institutions are institutions providing small financial

support like loans to people who donor have access to big 1 2 3 4 5
investments or loans
These institutions are very active and many poor people have of
several occasions accessed loans from these institutions 1 2 3 4 5
Microfinance institutions not only provide loans but also advice to
the people that are need of these funds. The advice can be regarding 1 2 3 4 5
the use of the funds as well as better business management
They have provided employment to the natives or local people 1 2 3 4 5
They provide support through buying the small enterprise produce 1 2 3 4 5
Microfinance institutions have positively enhanced development of 1 2 3 4 5
small businesses in Makindye town
The services of these institutions are mainly targeting the poor 1 2 3 4 5
Performance
The organizations have provided quality and efficient services

26
towards the boosting of small scale enterprise development 1 2 3 4 5
Institutions are located near the people and in rural areas to ensure
easy accessibility to the services. 1 2 3 4 5
The performance of these organizations is highly impacted on by
the government factors and requirements. 1 2 3 4 5
Their also affected by the willingness of the people to use the
services. 1 2 3 4 5
Some of the people do not know the role of these institutions and it
is because of lack of capacity building and the fact that most of 1 2 3 4 5
them never went to school.
The institutions have been able to deliver and take a step towards 1 2 3 4 5
small enterprise growth
The institutions are however challenged by a number of factors and 1 2 3 4 5
constraints such as lack of trust from the natives and the political
issues in the country
All in all the microfinance institutions have not covered a wide area
due to the instabilities in the country 1 2 3 4 5

Section C
Small Scale Enterprise

27
Micro finance and Small Enterprise

Makindye town is a fast growing town occupied with trade and 1 2 3 4 5

commerce.

The area is full of small scale enterprises that are privately owned 1 2 3 4 5
by the natives.
Small enterprises are operating on a small scale with capital and
finance from the sole owners of the enterprises 1 2 3 4 5
They are mainly providing or dealing in necessities
1 2 3 4 5
Most of the owners of these enterprises have always got support
from financers like microfinance institutions in the area 1 2 3 4 5
The small enterprises are usually operating on a small scale 1 2 3 4 5
They are characterized with having a single owner who largely
gains from the
Small enterprises have highly expanded and increased in number 1 2 3 4 5
and this has solved the unemployment problem

Section D
Microfinance services on small enterprises
Impact of microfinance services on small enterprises
Microfinance has largely contributed to the introduction of new
small enterprises in Makindye town 1 2 3 4 5
Microfinance has provided financial support to small enterprises

28
and this has led to their expansion 1 2 3 4 5
Microfinance has been the major source of capital for the small 1 2 3 4 5
scale enterprises in the region
They have provided advice and also developed new ideas for
survival in rural areas like Makindye villages 1 2 3 4 5
Microfinance institutions have provided investments to ideas of
young entrepreneurs leading to establishment of new small 1 2 3 4 5
enterprises
The institutions provide support through offering small affordable 1 2 3 4 5
loans to the local people
They provide achievable standards inform of advice to business
owners on how to manage business 1 2 3 4 5
The development of small enterprises has increased because of the 1 2 3 4 5
support from the microfinance institutions
The institutions have not effectively improved or led to growth of 1 2 3 4 5
the small enterprises.
The services of the microfinance have not effectively been used by
many natives due to ignorance about their existence 1 2 3 4 5
The institutions are also challenged by the large financial
institutions such as the commercial banks that also offer the same
services
Thank you for your support
Appendix II

PROPOSED BUDGET

Particular Quantity Amount (UGX)

Stationary Paper 5 Reams 70,000/=

Ink 1 Cartridge 35,000/=

Binding materials 10 250,000/=

Transport costs 500,000/=

29
Data Analysis 400,000/=

Up keep
Activity Ap Mar 300,000/=
Jun Jul Jun
r
Miscellaneous 200,000/=
1. Conceptual Phase XX
Total 1.755,000
Chapter 1 XX

2. Design & Planning Phase XX

Chapter 2-3 XX

3. Dissertation Proposal XX

4. Empirical Phase XX

Data Collection XX

5. Analytic Phase XX

Chapter 4-5 XX

Appendix III: Time frame

30
6. Journal Article XX
7. Dissemination Phase XX

Viva Voce XX

8. Revision XX

9. Final Book Bound Copy XX

31