Evaluating the impact of microfinance institutions on household’s welfare in Uganda: Analysis of the Uganda National Household Survey (UNHS, 2017)
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The purpose of the study was to evaluate the impact of microfinance institutions on household welfare in Uganda. The study was guided by the following specific objectives; to establish the influence of microfinance institutions on households’ welfare in Uganda, to examine the relationship between microfinance institutions accessibility, and physical development of households in Uganda, to assess the influence of microfinance institutions accessibility on consumption levels of households in Uganda and to establish the accessibility of financial information by households in Uganda. The study used secondary data from the Uganda National Household Survey (UNHS, 2017) with specific focus on all regions in Uganda. The study population were all individual households who were interviewed during the Uganda National Household Survey (UNHS, 2017) carried out in 2016. The data was analyzed and all variables were tested for significance and a regression model was applied to determine the effect of microfinance institutions on household welfare. The study established that microfinance did not have a significant effect on household welfare in Uganda. The welfare of households is positively and significantly influenced by education level, household assets, consumption levels, place of residence and employment status. It was established that the main source of household income was crop farming (small scale). This was followed by wage employment and none agricultural enterprises. Results further indicate that the major sources of loans/credit were village savings and loans associations, commercial banks and saving and credit cooperatives associations among others. The main purposes for the most recent loans/credit were to meet household expenditures such as school fees and funeral expenses, start business, expand the business, and to service other loans. These results suggest that microfinance is largely used for consumption and hence its impact on household welfare is not visible. The majority of beneficiaries generally applied for very small microfinance loans.