Effect of Micro Credit Policies on Customer Retention in Saccos A Casestudy of Bumucentral Finance Sacco

ABSRACT

The purpose of the study was about the effect of micro credit policies on customer retention in Saccos. It was carried out in Bumu cential finance Sacco along St. Balikudembe Market in

Kampala district, 2016. The study was guided by three specific objectives: the micro credit policies in Bumu Central Finance Sacco, to establish the level of customer retention and to determine the relationship between micro credit policies and customer retention in SACCOS.

The study used a cross sectional descriptive research design. Methods used in data collection included: interviews, observation and questionnaire. A sample of 32respondents was used, data was analyzed using tables.

The researcher found out that Bumu Central Finance Sacco has strong policies it uses when carrying out its lending business , for credit limit , the institution has different credit limits which are based on the type of idan given and the graduation policy of the growing clients’ loan size in phases to avoid over financing and trickery by unscrupulous clients. The research found out that the insdtution is having a moderate rate of clients desertion although high interest rates charged was noted to be the major cause of desertion and the poor customer handling by the field staff. The researcher found out that there is a significant inverse relationship between the credit

policies and customer retention of 0.803 by Pearson correlation coefficient.

The researcher recommended that there should be encouragement of individual to acquire individual loans in order to prevent loyal clients from being penalized on behalf of those members of the group who fail to fulfill their part this is because this problem is leading to desertion of potentitil clients.

TABLE OF CONTENT

DECLARATION i

APPROVAL ii

DEDICATION iii

ACKNOLELEGEMENT iv

TABLE OF CONTENT v

LIST OF ACRONYMS ix

ABSRACT x

CHAPTER ONE 1

INTRODUCTION 1

1.0 Introductidn 1

1.1: Background of the study 1

1.2 Problem Statement 2

1.3 Purpose of the study 3

1.4 Objectives of the study 3

1.5 Research questions 3

1.6. Scope of the study 3

1.6.1 Content scope 3

1.6.2 Time scope 3

1.6.3 Geographical Scope ~ 3

1.7 Significance of the study 4

1.8 Conceptual frame work 4

CHAPTER TWO

LITERATURE REVIEW 5

2.0 Introduction s

2.1 Credit Policies used by Burnu central finance Sacco 5

2.3.1 Causes of withdraw of desertion of Bumu central finance clients 7

2.3.2 In adapted prodiacts 7

2.3.3 Demand reasons 8

2.3.4 Socio economic characteristic 9

2.4 Relationships between credit policies and customer retention 10

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2.5 Conc1usio~~ . 10

CHAPTER THREE .11

METHODOLOGY 11

3.0: Introduction 11

3.1: Research design 11

3.2: Data type and sources 11

3.3 Area and Population of Study 11

3.4 Sample Size and Selection 12

3.5 Data Collection Methods 12

3.6 Data Analysis 13

3.7 Data Processing 13

3.8 Data Presentation 14

CHAPTER FOUR 16

PRESENTATION, ANALYSIS, INTERPRETATION AND RESEARCH FINDINGS 16

4.1. Introduction 16

4.2. Characteristics of Respondents 16

4.2.1 Respondents’ gender 16

4.2.2: Age categories of respondents 17

4.2.3: Marital status of respondents 17

4.2.4: Level of education of respondents 18

4.3 Credit policies used by BCFS (Bumu Central Finance SACCO) 19

4.3.1 The character and credit of the clients is considered when processing a loan for a clientl9

4.3.2 Capacity as a mode of assessing clients to repay 19

4.3.3 Bumu ~entral finance bases on the value of security to advance loans 20

4.2.4 Bumu central finance SACCO has an upper credit limit 20

4.2.5 Extension of a satisfactory credit period to the clients 21

4.2.6 Interest rates payable to the institutional are affordable to all clients 21

4.2.7 The Institution considers adequacy of information about the clients 22

4.4 Level of customer retention in BCFS 23

4.4.1 Bumu Central finance Sacco keeps client’s records 23

4.4.2 Most clients come back to bdrrow again 23

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4.3.3 Rate of desertion of the clients.24

4.4.4 The clients of this institution have stayed the last three years 24

4.4.5 Buthu central finance SACCO loan collection methods cause clients to drop out of the

institution 25

4.5 The relationship between credit policy and customer retention in Bumu central finance

Sacco 25

4.5.2 Bumu~central finance Sacco brings clients to discuss about loan payments 26

4.5.3 Visits are made to clients to remind them of their loan obligation 26

4.5.4 Reminder k~tters are sent to clients about paying up their loans in case of default 27

CHAPTER FIVE 28

SUMMARY, CONCLUSION AND RECOMMENDATIONS 28

5.1 Introduction 28

5.2 Summary of major findings .~ 28

5.3 Conclusion 29

5.4 Recommendadons and suggestions 29

5.5 Suggestion for further research 30

REFERENCES 31

APPENDICES 34

Appendix I: Questionnaires to Be Filled By Employee of Bumu Central Finance SACCO .... 34

Appendix II: interview Guide 37