Loan Conditionalities and Accessibility by Clients in Microfinance Institutions in Uganda: A case of Pride Microfinance Ltd

Abstract

The study investigated Loan Conditionalities and Accessibility in Microfinance Institutions in Uganda: A Case of Pride Microfinance Ltd. The objectives of the study were; to assess loan collateral security conditions on loan accessibility, to determine the effect of loan repayment schedule conditions on loan accessibility and to examine the effect of cost of borrowing conditions on loan accessibility at Pride microfinance Uganda. A descriptive study design was used which deployed both qualitative and quantitative approaches. Sampling techniques used were purposive and simple random sampling techniques. The study findings established that Pride Microfinance Ltd charges collateral to offset losses in case of borrower default and that inadequate collateral makes it difficult in acquiring loans. It was also found out that collateral requirements reduce lending, loans are closely supervised and that and social collateral makes loans more secure. Pride Microfinance Ltd loans are set on flexible repayment schedules for clients, weekly collections of repayment installments, there are frequent meetings between our loans officers and our clients and that clients have to follow the microfinance schedules to repay borrowed loans. Tight repayment schedules attract some costs, high repayment rates are associated with benefits of repayment, repayment schedules inculcate fiscal discipline among our borrowers. There are high transactions costs, borrowers incur a wide range of costs beyond interest rates, there are travel times and lost time costs, borrowers incur group formation and screening costs, apply standard and stringent requirements on borrowers to determine their ability to repay, increase revenues by increasing costs of borrowing, borrowers’ ability to repay is directly affected by our interest rate levels, incur high staff costs. From the study findings, it is concluded that microfinance conditionalities like collateral security, high interest rates, transactions make it difficult for clients to access loans. Thus, such conditionalities have a positive effect on loan accessibility at Pride microfinance Uganda. The study recommended that there should be other collaterals put as security for people to access loans and that the loan repayment schedule conditions should be made easy so that people can access loans. The cost of borrowing conditions should be reduced so that loan can be accessed by people.