The Effect of Microfinance Institutions on Socio-economic Development: A Case Study of Inkingi S.A In Kicukiro District

ABSTRACT This report is a result of au academic research entitled the Effect of Microfinance Institntions on socio-economic development, a case stndy of INKINGI S.A in Kicukiro district. The objectives of the stndy were to investigate the products/services offered by microfinance INKINGI S.A, to assess the contribution of products/services offered to socio-economic welfare of beneficiaries, and to identify challenges faced by INKING! S.A in offering products/services. To answer research questions, purposive san1pling, was used to sample the population of the stndy. Instruments used to collect primary data included the questionnaire and interview guide while tables and graphics were used in presentation and analysis of data. It was discovered that Microfinance INKING! S.A offers limited number of products/services: savings at credits/loans and guarantee letters. The researcher found that those products have contributed a lot on improvement of socio-economic conditions of the beneficiaries particularly and of Kicukiro districts in general because clients afforded education. medical insurance, food security and empowerment, which led to improvement of socio-economic indicators of Kicukiro district. The challenges faced by INKING! S.A include among others lack of new technology, interest rate and collateral rates imposed by the National Bank of Rwanda. The researcher recommended among others to increase the products offered like training, insurance and recommended to the Government to review interest rate and collateral policy to ease poor people access to products/services of microfinance institutions.

TABLE OF CONTENTS 

DECLARATION .........•........•.•..•..•.•••••..•.......•.....................•..••..•..••...••.•••...•..........••••..•••••• ii 

APPROVAL ..••.••.................••.....••••••••.•..•................•....•.•.......•....•.............•....................... iii 

DEDICATION •••..•••.....•.....•.....•..•..••••••••••.............•...•..•..•...•.•••.......•....•.....•.••••••••..•••••.••.•••• iv 

ACKNOWLEDGEMENTS ..•...............•.•••••••.•••.•.•••....•.....•.•••••••....•....•....••..••.••••••••••.•••••••••• v 

LIST OF TABLES •..••••••••.................•...•..••••••.•••.....••............•..••....•......•.......••..••••...•••.•••••••. x 

LIST OF FIGURES ..••.••.••..•.........•.........•..•••••.•••.•.............•.•••.............•......•.••.•••••.•••••....••••• xi 

LIST OF ACRONYMS ••..•........•.••..•••.•••••••..•••..•....•...•.•....•••••.•....•....•....••••••.•.•.•••..•••••••.... xii 

ABSTRACT .....•••.............••..••••••••••..•..........•...••.••••..••••.......•..•....••.••..•••.••..........•............ xiii 

CHAPTER ONE : INTRODUCTION ...............................•........................•.......•........•.•.. 1 

1.0 Overview. 

I. 1 Background of the Study .. 

1.2 Statement of the Problem ... 

1.3 Purpose of the Study .... . 

1.3 .1 General Objective ..... . 

1.3.2 Specific Objectives ... . 

1.4 Research Questions .. . 

1. 5 Scope of the Study .... 

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1.6 Significance of the Study .............................................................................................. 6 

1. 7 Structure of the Thesis .................................................................................................... 7 

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CHAPTER TWO : LITERATURE REVIEW ..........................................•....................... 8 

2.0 Overview..................... . ...................................... 8 

2.1 Understanding the Microfinance.......................... . ...................................... 8 

2.2 Products/services offered in Microfinance institutions.......... . ................................ 10 

2.3 Contribution ofMicrofinance institutions on socio-economic welfare ........................... 12 

2.4 Extraneous factors influencing micro finance services . . . . . . . . . . .. . .............................. 15 

2.5 Challenges faced by microfinance in products/services offer...... . .............................. 17 

2.6 Mechanism ofMFls to overcome market imperfections and risks ................................ 18 

2. 7 The historical background of Micro finance institutions in Rwanda .............................. 19 

2. 7.1 The Current Situation ofMicrofinance Institutions 

2.8 Conceptual Framework. 

2.9 Review ..... . 

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CHAPTER THREE : METHODOLOGY ....••••••.•••...........••••••..............•••.•••.......•.•.......•••.•• 25 

3.0 Overview... . ............................ 25 

3 .1 Research Design.... . ............................... 25 

3 .2 Population . . .................................. 26 

3.3 Sampling Procedure ................................... 26 

3 .4 Sample Size.............. . . ................................ 26 

3.5 Instruments............................................................ . ................................. 27 

3.5.1 Validity and Reliability ofinstruments ........ . .................................. 27 

3.6 Procedure................. . ....................................... 28 

3.7 Data analysis.............. . .................................. 29 

3.8 Limitations of the Study. . ..................................... 29 

3.9 Summary........................................................................... . .................................. 30 

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CHAPTER FOUR : PRESENTATION AND ANALYSIS OF THE FINDINGS ......... 31 

4.0 Overview........................................................... . ............................... .31 

4.1 Products/services offered by microfinance INKING! S.A... .. . .......................... .31 

4 .1.1 Demographic information of clients that receive micro finance services ..................... 3 3 

4.1.2 Types of businesses financed by Microfinance INKINGI S.A ................................... 36 

4.1.3 Suggestions of respondents on products/services delivery by INKING! S.A .............. 39 

4.2 Contribution ofMFis on socio-economic development ofKICUKIRO district ............ .40 

4.2.1 Income Growth........ . ....................................... .40 

4.2.2 Other achievements due to MFis products/services by clients ................................... .42 

4.2.3 Contribution ofINKINGI S.A in overall development ofKicukiro district ............... .43 

4.3 Challenges faced by INKING! S.A in offering products/services ................................. .45 

4.3. l Challenges expressed by the management oflNK.lNGI S.A ...................................... 45 

4.3.2 Challenges identified from beneficiaries ofINKINGI S.A services ........................... .46 

4.3.3 Mechanisms used by microfinance to overcome challenges ...................................... .48 

4.4 Summary .................. . ································.49 

CHAPTER FIVE : DISCUSSIONS, CONCLUSION AND RECOMMENDATIONS .50 

5.0 Overview ...................... . ·····················50 

5.1 Discussion of the Findings .................................. . . ...................... 50 

5.2 Conclusion ............................................................ . ···································53 

5.3 Recommendations .......... . . ..................... 54 

5 .4 Areas of Further Research ...................... 55 

REFERENCES ••..•••••••.•••••.•.•.•.•...............•.••••.••••.•.••.•.•.•.•.••••.•.•.•............••...•.••••••..•........... 56