Social capital, joint liability and re-payment performance: The case of Pride Micro Finance in Bugiri District.

Abstract

The purpose of the study was to establish the relationship between Social capital, Joint liability and Repayment performance. The study was guided by the following research objectives; to establish the components of social capital, joint liability and repayment performance, to examine the relationship between social capital, joint liability and repayment performance, to examine the predictive potential of social capital and joint liability on repayment performance and to establish the predictive potential of the components of social capital and joint liability on repayment performance.

Using a sample of 127 clients engaged in active group borrowing in Bugiri District selected using purposive sampling, a cross sectional research design was adopted which involved descriptive, correlation and regression approaches. The study revealed that there was a significant positive relationship between Social capital, Joint liability and Repayment performance. The results from the regression analysis indicated that Social Capital and Joint liability together explained 53.6% of the variance in the Repayment Performance.

It was recommended that since social capital, joint liability and repayment performance worked well in the rural areas where poverty is significant as compared to the urban, it would be prudent for government to adopt the trust and networks that exist among client groups as it proposes the extension of microfinance services to the rural areas as a strategy to alleviate poverty. Besides, workshops and meetings for client groups should be conducted so that business progress is discussed to enhance better ways of improving savings and consequently good repayments by the groups. Furthermore, the Micro Finance Institutions should work hand in hand with the Community Development Officers to assist in giving guidelines for the formation of successful groups. Additionally, the microfinance institutions should continuously interact and share information with their clients on productive business ventures which are tailored based on the clients residence. Finally, group screening, mentoring and routine monitoring should be undertaken by the microfinance institutions before credit is extended to clients in order to minimize instances of defaulting among their clients.