TITLE PAGE

AN ASSESSMENT ON THE IMPACT OF MICROFINANCE

INSTITUTION ON WOMEN EMPOWERMENT IN SIERRA

LEONE.

CASE STUDY OF BOMBALI DISTRICT BRAC MICROFINANCE

MAKENI. CITY.

By:

JOHN MOMODU SESAY

(Business Administration department)

A dissertation submitted to the department of Business

Administration in the faculty of Social and management

sciences in partial fulfillment of the requirements for

award of a Higher Diploma in Business Administration.

.

May/June, 2023.
 DECLARATION OF AUTHORSHIP

I hereby declare that this submission is my own work and that, to the best of my

knowledge and belief, it contains no material previously published or written by

another person nor material which to a substantial extent has been accepted for the

award of any other degree or diploma at the Ernest Bai Koroma University of Science

and Technology (EBKUST) or any other educational institution, except where due

acknowledgment is made in the dissertation.

………………………………………………… ………… ……………

Name of Student and ID Signature Date

I
 CERTIFICATION

I certify that, John Momodu Sesay (student) in the department of Business

Administration undertook this research under my supervision and that, this

presentation is a true reflection of the result and conclusion obtained by him.

Supervisor: Mr. Abdulai B. Turay

Signature: ….…………………………………………..

Date: ……………………………………………………

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 DEDICATION

This piece of work is specially dedicated to the Glory of God and members of my

family more especially the Sesay family for their tireless effort for bringing me thus

far.

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 ACKNOWLEDGEMENT

I give thanks and praises to the almighty God for haven given me all what it takes in

enduring to the completion of this course. I would also like to thank the following

families, without whom I would not have been able to complete this research, and

without whom I would not have made it through my course! Uncle Mr. Alex S.

Conteh, elder brother and sister Daniel S. Sesay, and Kumba Sesay. My appreciations

directly goes to uncle John Abdul Kamara who took his time behind the computer

until the last dot needed is inserted into this study. Another special thanks to My

supervisor Mr. Abdulai B. Turay for his precious time in guiding me on this research.

To my colleague in campus Mabinty Susan Kargbo, who have supported in me

providing the man behind the computer! Finally, my biggest thanks to BRAC

microfinance for providing information to the study!

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 LIST OF ACRONYMS

ANOVA ------------------- Analysis of Variance and cross tabulations

PRA ----------------------- Participatory Rural Appraisal

ALPs ------------------- Agro-based alternative Livelihood Programmes

NGO ----------------- Non-Governmental Organization

EBKUST ------------- Ernest Bai Koroma University of Science and Technology

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 ABSTRACT

Microfinance (credit) has been found to be a critical instrument in order to improve

the livelihood of the poor; and is not a new development. Its origin can be traced back

to 1976, when Muhammad Yunus set up the Grameen Bank, as experiment, on the

outskirts of Chittagong University campus in the village of Jobra, Bangladesh. It is

prominently used to improve the livelihood of household borrowers where it is

believed to be under exploited in research hence is indispensable to examine its real

effectiveness, to have sufficient information on the economic and social impact

indicators (human capital). For the purpose of assessing the impact of microfinance in

improving the livelihood of the poor people in urban areas, Makeni city to be specific,

a sample of 60 respondents. Data were collected through semi-structured

questionnaires that were prepared and distributed for both clients and eligible non

clients and oral interview was conducted while the questionnaires were filled out by

the respondents. The collected data were edited, analyzed and discussed using charts,

tables, numbers, and percentages. The result of the study displayed that microfinance

participation has a positive significant average effect on households’ average monthly

income, consumption expenditure, savings and housing improvements. However,

study recommended that the government and development partners should endevour

to provide financial assistant to the MFIs, so that they could provide the loans at a

subsidize rate so that the loans become affordable to the poor clients. The

Microfinance Institutions must also endevour to restructure their training contents to

include improving their clients’ business skills. They should organize regular training

for their clients and the loan officers as well.

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 TABLE OF CONTENTS

PAGE NO

Declaration of Authorship --------------------------------------------------------------- i

Certification -------------------------------------------------------------------------------- ii

Dedication --------------------------------------------------------------------------------- iii

Acknowledgement ------------------------------------------------------------------------ iv

List of Acronmys -------------------------------------------------------------------------- v

Abstract ------------------------------------------------------------------------------------- vi

Table of contents ------------------------------------------------------------------------- vii-ix

List of Tables ----------------------------------------------------------------------------- x-xi

List of Figures ---------------------------------------------------------------------------- xii

CHAPTER ONE: INTRODUCTION AND BACKGROUND TO STUDY

1.0 Introduction --------------------------------------------------------------------------- 1

1.1 Background --------------------------------------------------------------------------- 1

1.1.1 Background of the Study ---------------------------------------------------------- 1-5

1.1.2 An Overview of the study -------------------------------------------------------- 5

1.2 Statement of the Problem ----------------------------------------------------------- 5-6

1.3 Objectives of the Study ------------------------------------------------------------- 6

1.4 Research Questions -------------------------------------------------------------------- 7

1.5 Significance of the Study -------------------------------------------------------------- 7

1.6 Limitations of the Study -------------------------------------------------------------- 8

1.7 Research Map --------------------------------------------------------------------------8

CHAPTER TWO

2.0 LITERATURE REVIEW --------------------------------------------------------------

VII
2.1 Introduction -------------------------------------------------------------------------------

2.2.0 Impact of Microfinance in Improving the Livelihood of the Poor --------------

2.3 Impact of Microfinance on Poverty Alleviation ------------------------------------

2.4 Microfinance as Development Tool ---------------------------------------------------

2.5.0 Impacts of Microfinance on Households Income, Savings and Expenditure.---

2.5.1 Impact of Microfinance on Households Income -----------------------------------

2.5.2 Impact of Microfinance on Households Savings ------------------------------------

2.5.3 Impact on Households Expenditure ----------------------------------------------------

CHAPTER THREE

3.1 Introduction ---------------------------------------------------------------------------------

3.2 Research Design ---------------------------------------------------------------------------

3.3 Study Area ----------------------------------------------------------------------------------

3.4.0 Population and Sampling ---------------------------------------------------------------

3.4.1 Targeted Population ---------------------------------------------------------------------

3.4.2 Sample Size -------------------------------------------------------------------------------

3.5 Sampling Technique -----------------------------------------------------------------------

3.5.0 Data Collection Method ----------------------------------------------------------------

3.6 Sources of Data ----------------------------------------------------------------------------

3.6.1 Primary Data Source -------------------------------------------------------------------

3.6.2 Secondary Data Sources --------------------------------------------------------------

3.7 Methods of Data Analysis --------------------------------------------------------------

3.8 Ethical Consideration --------------------------------------------------------------------

CHAPTER FOUR

4.1 Introduction ------------------------------------------------------------------------------

4.2 Demographic Information of the Respondents

VIII
CHAPTER FIVE

5.0 Introduction ------------------------------------------------------------------------------

5.1 Summary of the Previous Chapters --------------------------------------------------

5.2 Summary of the Research Findings From both Primary and Secondary Data ---

5.3 Conclusion ---------------------------------------------------------------------------------

5.4 Recommendations ----------------------------------------------------------------------------------------------

References ------------------------------------------------------------------------------------

Questionnaire -------------------------------------------------------------------------------

LIST OF TABLES

Table 4.1: Gender Distribution of the Respondents ---------------------------------------

Table 4.2: Age Distribution of the respondents -------------------------------------------

Table 4.3 Marital status of the respondents ----------------------------------------------

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Table 4.4: Data representing the family size of the respondents ----------------------

Table 4.5: Frequency distribution of educational of respondents ---------------------

Table 4.6: Relates to the question “Have you ever received any microfinance product

or services from any of the MFIs in Makeni” -----------------------------------------------

Table 4.7: Frequency distribution of the type of microfinance products or services

respondents have benefited from ----------------------------------------------------------

Table 4.8: Frequency distribution containing the reasons for the use of microfinance

product -------------------------------------------------------------------------------------------

Table 4.9: Frequency and percentage distribution describing respondents’ opinion as

regard to the statement “Income increases after accessing the Microfinance Services”

-----------------------------------------------------------------------------------------------------

Table 4.10: Response on “increased saving after accessing MFI’s services -----------

Table 4.11: Frequency and percentage distribution of respondents’ opinions regarding

“Better access to education better housing and increased in standards of living” after

accessing microfinance services -----------------------------------------------------------

Table 4.12: Relates to the question “has joining microfinance programme improves

your quality of life?” -------------------------------------------------------------------------

Table 4.13: Frequency and percentage distribution of respondents’ ability to response

to their basic needs after accessing a loan -----------------------------------------------

Table 4.14: Frequency and percentage distribution of respondents’ opinion regarding

the differences in terms of before and after accessing a loan in affording to pay for

services expenses such as medical, education, electricity and water rate. -----------

Table 4.15: Frequency and percentage distribution of sources of finance or credit

available to respondents before joining microfinance programme --------------------

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Table 4.16: relates to the question “Did you normally get the amount you requested

for?” --------------------------------------------------------------------------------------------

Table 4.17: Frequency and percentage distribution of respondents’ opinion regarding

the interest rates charged by the Microfinance Institutions in the study area.------------

Table 4.18: Frequency and percentage distribution of respondents’ opinion regarding

the statement “Microfinance is an effective financial development tool to alleviate

poverty: -----------------------------------------------------------------------------------------

Table 4.19: Relates to the question “How do you rate the effectiveness of

microfinance programme in poverty alleviation” -----------------------------------------

LISTS OF FIGURES

Figure 4.1: A sample bar chart showing the type of products or services received by

clients -------------------------------------------------------------------------------------

Figure 4.2: A simple pie chart representing clients responses regarding the statement

“Increased savings after accessing MFIs Services”.-------------------------------------

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Figure 4.3: A pie chart showing respondents’ opinions as regarding to whether

participating in microfinance improve their lives or not -------------------------------

Figure 4.4: A simple bar chart showing the sources of financial/credit available to

respondents before joining microfinance programme ----------------------------------

Figure (4.5): A pie chart showing the responses to the question whether the client get

the amount they requested for. --------------------------------------------------------------

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CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter gives an overview of the study. Background information of the study is

given which brings out the research problems. Research questions are posed and the

research objectives clearly stated. justification of the study is also highlighted. Finally,

limitations of the study is also highlighted.

1.1 Background of the Study

1.1.1 Background on the Impact of Microfinance Institution on Women

Empowerment.

Poor people lack access to loan from commercial banks due to many reasons

including lack of guarantee and collateral, lack of education and proper training, high

expenses on transactions of small loans etc; hence the poor are pushed in more

poverty. Poverty reduction and improving livelihood conditions of people especially

the poor, have been critical development challenge over many years in both

developed and developing countries. The challenge of reducing poverty and

improving livelihood conditions for poorest population is a formidable. The

betterment of poor people requires an effort that spans all sectors of the economy and

may not be easy to achieve through economic growth alone. Improved access to

financial services helps poor people by enabling payment transactions then bring them

into the formal sector. Many researchers have found access to financial services as a

central role in poverty reduction. Because financial services enable poor people to use

profitable business opportunities and raise earnings. Since poor people often have

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insufficient traditional forms of collateral to offer, they are often excluded from

financial market (Asmamay, 2014). The formal financial institutions were reluctant to

extend credit facilities to the poor for fear that loans would not be repaid. Poor

borrowers faced high transaction costs when they sought loans from formal financial

institutions. The costs included time, travel and paperwork involved in obtaining

credit.

From the 1950s governments and international aid doors delivered subsidized credit

to small farmers in rural areas of many developing countries. It was assumed that

people found great difficulty in obtaining adequate volumes of credit and were

charged high rates of interest by monopolistic moneylenders. Development finance

institutions, such as Agricultural Development Banks were responsible for the

delivery of cheap credit to poor farmers (Robinson 2001). These institutions

attempted supervise were put and repayment schedules were based on the expected

income flow from the investment returns, which were often overestimated. As a result

loans were often not repaid. The credibility and viability of these subsidized credit

schemes were further weakened. Fluctuation whims of many governments of

developing world, Sierra Leone inclusive and donors together with poor investment

decisions and how repayment rates made many of development finance institutions

unable to sustain their lending programs. Donors and other resources suppliers

criticized the model of subsidized credit they recommend that the model should shift

from government intervention subsidy to market based solutions (Hailu, 2005). Policy

makers were reminded that credit should be described as debt and that the over-supply

of subsidized credit without realistic assessment of people’s ability to repay could

result in impoverishment for borrowers (Abebe, Tirune, 2001).

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This situation resulted in emerging the idea of micro-lending and microfinance. This

micro lending is a way of financing the poor for their businesses to alleviate their

poverty by empowering them, giving social benefits on sustainable way (Agion and

Morduch, 2005) Microfinance is therefore a financial undertaken which focuses in

enhancing human livelihood of the poor in the society by reducing poverty level

(Gupta, 2001). It involves the provision of financial services including credit loans,

savings and insurance targeting the poor and the low income earners. Since its

inception in the late 1970’s microfinance is widely known as a financial development

of tool for those deprived of access to financial services.

According to Robinson (2001), there were two known approaches of microfinance in

its initial development in the late 1970’s. These are poverty lending approach and

financial system approach. Both approaches share the goal available to the poor

throughout the world. The poverty lending approach focuses on reducing poverty

through credit and other services provided by institutions that are funded by donors

and government subsidies and other concessional funds. A primary goal of this

approach is to reach the poor with credit. Saving is not a significant part of this

approach but mandatory saving is a precondition for receiving the loan. The emphasis

is on micro-credit, not microfinance. The poverty lending approach was first realized

in Grameen bank in Bangladesh. It has wide outreach to poor borrower, but the

approach has required large amount of continuing subsidies and does not meet poor

people’s demand for saving services. Due to these, it has not proven globally

affordable model (Robinson, 2001) with the failure of Credit institutions to address

the grassroots (households) financial needs the situation demanded an innovative

approach to address the lower segment of the population.

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The financial system approach focuses on commercial financial intermediation among

poor borrowers and savers; and also emphasis to institutional self-sufficiency. The

approach targets lending to the economically active poor people, i.e. people with the

ability to use loans and the willingness to repay and to voluntary save mobilization.

Bank Rakyat (Indonesians micro-banking system) and Banco Sol (Salvia’s banking

system) are models of profitable microfinance institutions that used the financial

system approach of microfinance services delivery (Robinson, 2001).

The new paradigm was introduced as loans are made available in small amounts at

market rates, with low level of formality and limited requirements of collateral

repayment is undertaken frequently and rates of repayment in many microfinance

ventures are to be high (Kumar, 2005).

Today, microfinance has grown to cover a broad range of product and services from

credits and savings, to insurance and money transfers. Today many agree in the

definition of microfinance as provision of financial services to those excluded from

the formal financial system in broader terms (SUM, 2002). According to Joan Parker

(2000), microfinance refers to the delivery of financial services such as credits,

savings, insurance and other services to clients who are without access to the services

of formal sector, financial institutions on sustainable basis. This is the widely used

definition of microfinance. Microfinance programs which focused on the delivery of

financial services to the poor gained a worldwide acceptance and popularity since

1980’s (Robison, 1995). The developments in the 1980s represented as a turning point

in the history of microfinance development.

The importance of microfinance in eradicating poverty cannot be over-emphasized.

Since the emergence of the modern microfinance practice in the late 1970’s

microfinance has become an effective financial development tool in the economic

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credit market and target deprived people who cannot gain access to conventional

credit. Hence, this research is therefore aim at measuring the impact of microfinance

in enhancing women empowerment of urban citizens of Sierra Leone using a case

study of BRAC microfinance, Makeni branch.

1.1.2 An Overview of Brac Makeni.

BRAC Microfinance Sierra Leone Limited was launched in 2008. it is the largest

microfinance institution of the country with 42 branches in 12 districts including the

Makeni branch where the case study is done. It provides inclusive financial services to

people living in poverty, with a strong focus on women living in rural and hard-to-

reach areas, to create self employment opportunities, build financial resilience, and

harness women’s entrepreneurial spirit by empowering them economically. Their

mission is to provide a range of financial services responsibly to people at the bottom

of the pyramid.

1.2 Statement of the Problem

The review of several literature have shown that many studies have been conducted to

access the impact of microfinance on the empowerment of women in many part of the

world, but few have been done in sierra Leone. It is still debatable whether

microfinance programmes in Sierra Leone have been effective in enhancing not only

poor people’s income but their overall well being. At the inception in the late 1970s,

microfinance was seen as the silver bullet for the poor to fight against poverty. Since

then to date, microfinance has become very important in global poverty reduction

debates. The popular assumption is that enabling poor households access to credit

helps them begin micro entrepreneurship which would enable them improve their

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incomes and eventually escape poverty. The central aim of microfinance is to

alleviate poverty and empower its beneficiaries through financial services such as

microcredit, savings, insurance, and training. Microfinance is one of the

developmental programs that have attracted many projects gearing towards poverty

reduction. Microfinance was even mentioned by the United Nations (UN) as a

significant contributing factor for achieving the goals of Millennium Development

Goals (MDGs) of having extreme poverty cut by half by 2015. However, despite the

growing global and national effort in supporting microfinance programs, it is not so

clear whether the microfinance programmes in Sierra Leone are efficient in

alleviating poverty and promoting the overall wellbeing of its recipients. This is

because in spite of the emphasis of microfinance programmes in Sierra Leone, no

current research has provided sufficient justifications for the link between

microfinance and the improvement of the living standards of its clients. While

government and Non-Governmental Organizations (NGOs) have been engaging in a

number of programmes and policies to alleviate poverty in the country, Sierra Leone

remains on the list of the poorest countries in the world. This raises the questions on

the efficiency of microfinance programmes in improving the livelihood of women that

this study intends to measure.

1.3 Objective of the Study

The main objective of this case study is to access the impact of microfinance in

enhancing the livelihood of poor women in urban areas, Makeni city to be specific.

The specific objectives include:

 To access the effectiveness of microfinance programmes in Sierra Leone.

 To examine the impact of microfinance in improving the living standards of its

clients.

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 To access the effectiveness of microfinance in alleviating poverty.

 To provide information to microfinance institutions on clients’ perception and

satisfaction level for future service enhancement and microfinance industry

expansion.

1.4 Research Questions

The following are the research questions:

 What are the impacts of microfinance programmes on the livelihood of its

clients?

 Are the microfinance programmes efficient in reducing poverty level of clients?

 To what extent can microfinance improve the overall wellbeing of clients?

 To what ways can the microfinance programmes reduce poverty?

1.5 Significance of the Study

The result from the study would have both policy and management implications. The

study at hand intends to provide information that will be enlighten the government

donors, Non-Governmental Organizations(NGOs) and the public about the impact of

microfinance on the living standards of its recipients. It will also provide with

stakeholders the information they need to make improvement in the operations of

microfinance institutions in the community. The result from this research will also

provide management insight on what ought to improve from loan policies. The study

will also offer an achievable recommendations based on the findings from the survey

to other stakeholders on the areas needed improvement of the microfinance in the

country.

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RESEARCH HYPOTHESES

Based on the variables of the study which include: the independent variable

(microfinance programmes) and the dependent variable (standard of livelihood), two

hypotheses are proposed and shall be tested during the course of the study

 Null hypothesis (H0): microfinance programmes have no impact in improving

the livelihood standards of the poor (clients).

 Alternate hypothesis (H1): microfinance programmes have a significant

impact on the improvement of the livelihood standards of the poor.

1.6 Limitations of the Study

The perceived limitations of this study include the difficulty to get the required

information from the respondents. This is because most of the poor women or clients

of MFLs are illiterate; therefore, it will be very difficult to get the required data to

measure the impact of microfinance on women empowerment. The willingness of the

respondents to supply accurate and honest information, resources constrains such as

time and money that will be required to carry out the study. On top of all, the study

also intends to measure the impact of microfinance on women empowerment between

the periods of 2021 - 2023 which is a three-year period only.

1.7 Research map

The work is divided into five chapters. Chapter one introduces the study, chapter two

is a review of related literature that covers both theoretical and empirical aspects of

the research focus. The methodology used forms includes Chapter 3, which includes

research design, library research, study population, sampling, and the data collection

tools used. It also includes the type of data, the management of the tools, the data

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collection procedures, and the data analysis plan used by the researcher. Chapter four

deals with the presentation and discussion of the results from the data collected as part

of the study. The study concludes with a summary, conclusions and recommendations

for the implementation of all chapters in chapter five.

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CHAPTER TWO

LITERATURE REVIEW

2.0. Introduction

This chapter looked into the review of what other researchers have found out in

relation to the study in question. The study review will focus on especially other

researchers study objectives, data analysis, result, findings and conclusion that is

directly linked to this topic.

2.1 Theoretical Framework

2.1.0 IMPACT OF MICROFINANCE IN ENHANCING THE LIVELIHOOD

OF THE POOR

The living standards of individuals in society are said to be favourable when there is

adequate consumption, high educational level, proper availability of food, friendly

sanitary conditions, stable or non-restricted participation in the production system,

free support in the systems of social joining and opportunity of taking after to a

specific school of thought and qualities comparative or diverse to those that are held

by whatever is left of the general public (Kawira, 2016). Although many studies have

examined the issue of improving the living standard as a whole, not of them have

assessed the impact of microfinance efforts on improving the living standards.

Microfinance is also known as the financial undertaken which focuses on improving

the standard of living of needy people in the society by reducing the poverty level

(Kawira, 2016). Before investigative the impact of microfinance on enhancing the

standards of living of the poor individuals, it is important to first comprehend the

thought behind neediness and its relative theories. The world is portrayed by the

division of the individuals who have and the individuals who have not. The wealth

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people appreciate a rich life while the less wealthy experience the ill effects of

absence of better than average restorative and beneficial lives. Traditionally,

destitution was seen only as material hardship along these lines, living with low wage

and low utilization portrayed by poor sustenance and poor living condition (Kawira,

2016). This is what is viewed as wage neediness and is related to the poor medical

services and low instructive levels that are either the cause or the after effect of low

wage said to be human destitution.

The classical theory which was developed during the 18th and 19th centuries assumed

that every individual in the society is responsible for choosing their economic destiny

and thud dictation whether to be poor or to be rich (Mosley and Rock, 2004).

According to this theory, the poverty of an individual is seen as the consequence of

one’s choice which negatively affects productivity. Wrong choices taken by

individuals may lead them to welfare of poverty trap (Korynski, 2007).

In the neoclassic approach originates from Alfred Marshall’s publications of his book

“Principles of Economics” stresses that the role of unequal initial endowment of

talents, capital, and abilities play a big role on the well-being of individuals as well as

their poverty (Korynski, 2007).

The rational choice theory emphasizes that most individual will make the most

appropriate choice when faced with a situation of choosing among many options.

People should make decisions that will maximize the profit and reduce risk. This will

enhance their standard of living in society (Mosley and Rock, 2004).

The Marxian social capital theory suggests that radical changes in the socio economic

system in a society and economic growth may not be a sufficient approach to improve

the living standards of poor people because some social groups may not feel the

benefits or economic empowerment (Mwawana, 2011). Marxists believe that

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capitalism and related political and social factor aligned to class division are

responsible for the poor living standards in society. This theory emphasizes that the

poor living standards in a capitalist economy can only be alleviated through rigid

regulations of the market process. This means poor living standards are predominantly

the result of structural factors that include stratified labour markets, corruption and

prejudice.

2.1.1 IMPACT OF MICROFINANCE ON POVERTY ALLEVIATION

Before assessing the impact of microfinance on poverty, it is important to understand

the concept of poverty and its relative definitions. The literature contains number of

definitions of poverty starting with the lack of main resources to meet the basic needs

to sustain life. As stated in Smith (1776, p. 21) everyman is rich or poor according to

the degree he can afford to enjoy the necessaries, convenience and amusement of

human life.

There are two conceptualizations for poverty the traditional and the monetary concept.

The former refers to the ability of the individual o meet the basics needs of food and

consumption. The later refers to the materialistic boundaries to include other aspects

starting room education, health, shelter, nutrition, tell enjoying security and right like

freedom of speech (Haughton and Khandker, 2009)

There is no clear consensus among development experts and policy makers on how to

define measure and eradicate poverty. Accordingly, there is no single absolute and

standardized definition of poverty, rather than defining it in relative terms. Different

people view and define it in different ways. Traditionally, poverty was understand

primarily as material deprivation, as living with low income and low consumption

characterized by poor nutrition and poor living condition. This is known as income

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poverty it is also cited with low health and education levels that are either the causes

or the result of low income said to be human poverty.

According to the World Bank (2000 chap 1) poverty is defined as the “Pronounced

deprivation in well-being” where well-being here embraces not only material

capabilities as measured by income and consumption levels, but immaterial as well

measured by the level of education health, children nutrition and rights. Many

researcher define poverty on the basis of income level instead of using its broader

definition which include “Well-being”

A classical definition of poverty sees it as the inability to attain a minimal standard of

living measure in terms of basic consumption needs or the income required for

statisfying them (World Bank, 1990). Poverty is thus characterized by the failure of

individuals, households or entire communities to command sufficient resources to

satisfy their basic needs.

Whatt (1968) defines poverty as the lack of command over commodities in general or

alternatively the lack of command over some basic necessities of life. For Sen (1985)

poverty refers to the lack of capability to function in a given society.

However, all the definitions of poverty point to the phenomenon where the status of a

reasonable standard of living is not achieved. Poverty is therefore a condition in

which a person lack command over economic resources. For example an individual is

considered poor if he or she lacks food, education, health, shelter and other basic

necessities of life including clothing or if he/she lacks income to purchase these items.

Sen (1985) explains that one could be designated poor if one had a capability failure

to participate in the affairs of the society. Ability to function socially could merely

refers to lack of basic needs, such as food, shelter and clothing or complex issues such

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as freedom self-respect, social inclusion and political participation. Thus, one’s lack

of ability to achieve these socially desirable outcomes would make one poor.

Poverty is also a function of one’s on ability to maintain a socially acceptable

standard of living which depends on what is deemed to be socially acceptable

standard of living by a given society over time and space (Sen, 1985). For example, in

a society where most people own cars, the use of public transport may be an indicator

of poverty. Having no television (TV) in a technologically advanced society might

again be an indicator of poverty while in other countries a car could be a luxury good.

Therefore, one’s standard of living also depends on how it is measured in which case

the variable or the set of variables used to maximally capture the standard of living of

society may differ over space and time (Sen, 1985, UNDP, 2003).

However, when examining the impact of microfinance on livelihood, security and

poverty, it is important to be aware of the current debates that are taking place in the

field of microfinance. One of such debates is “impact measurement”. There is a

certain amount of debate about whether impact assessment of microfinance

programmes is necessary or not according to Simanowitz (2001). The argument

adequate proxies for impact showing that clients are happy to pay for a service,

assessments are a waste of resources. However, this is too simplistic a rational as

market proxies mark the range of client responses and benefits to the Microfinance

Institutions (MFI). Therefore, impact assessment of microfinance interventions is

necessary not just to demonstrate to donors that their interventions are having a

positive impact but to allow for learning within Microfinance Institution so that they

can improve their services and the impact of their programme (Simanowitz, 2001,

P.11).

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According to Littlefield, Murduch and Hashemi (2003, P.3), there are many studies

that document increases in income and assets and decrease in vulnerability of

microfinance clients. They refer to projects in India Indonesia, Zimbabwe,

Bangladesh and Uganda which all shows very positive impacts of microfinance in

reducing poverty. For instance, a report on a SHARE project in India showed that

three quarters of clients saw significant improvement in their economic well-being

and that half of the clients graduated out of poverty (2003, P.2).

Dichter (1999, P.26) states that microfinance is a tool for poverty reduction and while

arguing that the record of microfinance institutions in microfinance is “generally well

below expectation” he does concede that some positive impacts do take place from a

study of a number of Microfinance Institutions he states that findings show that

consumption. Smoothening effects signs of redistributions of wealth and influence

with the household are the most common impact of microfinance programmes.

Hulme and Mosley (1996, P.109) in a comprehensive study on the use of

microfinance to combat poverty argue that well designed programmes can improve

the incomes of the poor and can move them out of poverty. They state that “there is

clear evidence that the impact of a loan on a borrower’s income is related to the level

of income” as those with higher incomes have a greater range of investment

opportunities and so credit schemes are more likely to benefit the “middle and upper

poor” (1996, PP.109-112). However, they also show that when Microfinance

Institution such as the Grameen Bank and BRAC provided credit to very poor

households those households were able to raise their incomes and their assets (1996.

P.118).

Mayoux (2001, P.52) states that while microfinance has much potential the main

effects on poverty have been credit making a significant contribution to increasing

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incomes of the better-off poor, including women. A microfinance services contribute

to the smoothing out of peaks and troughs in income and expenditure, thereby

enabling the poor to cope with unpredictable shocks and emergencies.

Johnson and Rogaly (1997, P.122) state that “NGOs aiming for poverty reduction

need to assess the impact of their services on user’s livelihoods”. They argue (1997)

that in addressing the question of the impact of MF, NGOs must go beyond analyzing

quantitative data detailing the numbers of users and volumes and size of loans

disbursed to understanding how their projects are impacting on clients’ livelihoods.

They state (1997), P.118) that the provision of MF can give poor people “the means to

protect their livelihoods against shocks as well as to build up and diversify their

livelihood activities”. Curney (1998, P.4) defines a livelihood as comprising “the

capabilities, assets (including both material and social resources) and activities

required for a means of living”

Chambers (1997, P.10) states that livelihood security is “basic to well-being” and

security “refers to secure rights and reliable access to resources, food, income and

basic services. It includes tangible and intangible assets to offset risk ease shocks and

meet contingencies.

Lindenberg (2002, P.304) defines livelihood security as a family’s or community’s

ability to maintain and improve its income, assets and social well-being from year to

year. Concern (2003) also state that livelihood security is more than just economic

well-being as the define livelihood security as “the adequate and sustainable access to

and control over resources both material and social to enable households to achieve

their rights without undermining the natural resources base” (Concern 2003).

Livelihood security therefore, like poverty is not just about income but includes

tangible and intangible assets and social well-being.

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Otero (1999,P.10) illustrate the various ways in which “Microfinance at its core

combat poverty” she states that Microfinance creates access to productive capital for

the poor which together with human capital addressed through education and training

and social capital achieved through local organizational building enables people to

move out of poverty. By providing material capital to a poor person their sense of

dignity is strengthened and this can help to empower the person to participate in this

economy and society (Otero, 1999). The aim of microfinance according to Otero

(1999) is not just about providing capital to the poor to combat poverty on the

individual level, it also has a role at an institutional level. It seeks to create institution

that delivers financial services to the poor who are continuously ignored by the formal

banking sector.

Poverty reduction has been a concern of developing countries Sierra Leone inclusive

through emerging microfinance industry. The idea of poverty reduction through

microfinance has generated enormous enthusiasms among donors and NGOs as an

instrument for reducing poverty in a sustainable manner. The result of few case

studies have indicated that access to finance can reduce poverty Robinson (2001) in

her study concluded that households and enterprises could benefit from microfinance

institutions when voluntary savings are locally mobilized. Micro-enterprises can self-

finance in full or in a part their working capital needs as well as save total investment

needs. Saving accounts provide security, legal recognition of the household financial

management. Moreover it creates an opportunity to hold their savings in their own

name.

Clement (2010) investigates the socio-economic impact of microfinance in post

conflict situation using Sumi in Juba country South Sudan as a case. The study

critically examined what impacts microfinance has on the poor at the household level.

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The result show among others that Sumi micro enterprise credit played a big role in

providing the borrowers with a steady growing source of income made valuable

contributions to housing improvements and better clothing access to better health care

and education increased household asset base as compared to non-participants.

Microfinance is powerful instrument against poverty. Access to sustainable financial

services enables the poor to increase incomes build assts and reduce their

vulnerability to external shocks. Microfinance allows poor households to move from

everyday survival planning for the future, investing in better nutrition, improved

living condition and children’s health and education (CGAP, 2004)

Hulme and Mosley (1996) show that when loans are associated with an increase in

assets, when borrowers are encouraged to invest in low-risk income generating

activities and when the very poor are encouraged to save the vulnerable of the very

poor is reduced and their poverty situation improves.

Johnson and Rogaly (1997, P.12) also refer to examples whereby savings and credit

schemes were able to meet the needs of the very poor. They state that microfinance

specialists are beginning to view improvements in economic security rather than

income promotion as the first step in poverty reduction. More recently, microfinance

commentators such as Littlefield, Mureduch and Hashemi (2003) Simanowitz and

Brody (2004) and the International Monetary Fum (IMF, 2005) have commented on

the critical role of microfinance in achieving the Millennium Development Goals i.e

to reduce extreme poverty in the world. Simanowirz and Brody (2004), P.1) state

“Microfinance is a key strategy in reaching the Millennium Development Goals and

in building global financial systems that meet the needs of the most poor people.

Littlefield Murduch and Hashems (2003) state “Microfinance is a critical contextual

factor with strong impact on the achievement the MDGs; microfinance is unique

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among development interventions. It can deliver social benefits in an ongoing

permanent basis and on a large scale. Referring to various case studies, they show

how microfinance has played promoting eradicating poverty health and empowering

women (2007).

Johnson and Rogaly (1997, P.122) state that NGOs among for poverty reduction need

to assess the impact of their services on user’s livelihoods. They argue in (1997) that

in addressing the question of the impact of microfinance, NGOs must go beyond

analyzing quantitative data detailing the numbers of users and volumes and size of

loans disbursed to understand how their projects are impacting on clients livelihoods.

They state in (1997), P.118) that the provision of microfinance can give poor people

“the means to protect their livelihoods against shocks as well as to build up and

diversify their livelihood activities”. Therefore, when analyzing the impact of

microfinance the overall impact of the microfinance services on the livelihoods of the

poor needs to be taken into consideration.

Amin, Rai and Topa (2003) focus their article on the ability of microfinance to reach

the poor and vulnerable. They focus their article in such a manner because of

concerns that microfinance is only serving people slightly below or above the line of

poverty, however the really poor and destitute are been systematically excluded. By

contrast Copestake, Halotra and Johnson (2001) analyze the impact of microfinance

on firms and individual well-being. Copestake et al focus on business performance

and household income to establish a link between the availability of microfinance and

overall well-being of the poor. Evans and Adams (1999) approach the microfinance

question at a slightly different angle. However, they seek to explain non-participation

in the microfinance evolution stating that while microfinance is used as a viable tool

in fighting poverty, more than 75% of the poor individuals choose not to participate

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for various reasons. Ryne and Holt (1994) provide a meta-analysis of and focus on

women empowerment, intending to show while various studies conflict in their

conclusions as to the impact of microfinance on women empowerment.

However, some writers view regarding the impact of microfinance in reducing

poverty through increased in income is different. Wright (1999) highlights the

shortcomings of focusing solely on increased income as a measure of the impact of

microfinance on poverty. He states that there is a significant different between

increasing income and reducing poverty (1999). He argues that by increasing the

income of the poor necessarily reducing poverty. It depends on what the poor do with

this money, oftentimes it is gambled away or spent on alcohol (1999), so focusing

solely on increasing income is not enough. The focus needs to be on helping the poor

to sustain a specified level of well-being (Wright 1999, P.40). By offering them a

variety of financial services tailored to their needs so that their net wealth and income

security can be improved.

2.1.2 MICROFINANCE AS DEVELOPMENT TOOL

Financial Development plays a central role in poverty reduction and empowerment of

poor households. Microfinance is attractive and has been accepted as an important

tool to help poor in improving the livelihoods, reducing vulnerability and fostering

social as well as economic empowerment. The delivery of financial services have

been accepted as one of the poverty reduction tools in the development paradigm;

because it helps the poor to increase income, improve educational and health status,

improve housing condition, empowers the poor, provide confidence and social esteem

if it is realized appropriately (Chirkos, 2014). Human capital development has been

recognized by both governments in developed and developing nations as the major

ingredients for economic development of any nations. Access to loan through

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microcredit institutions is considered as an important factor for human capital

development since the supply of loans savings and other basic financial services to the

poor enable them to build assets stabilize consumption and shield themselves against

economics risk (Ehigia Musoe, 2005). According to Nilsson (2007) development is

deeply related to rising income. However, it is true other variable have also deep

relation with development Goals of development emphasize on the reduction of

poverty rather than raising average income (Haper M. 2003). All microfinance

programmes target one thing in general; human development that is geard towards

both the economic and social uplift of the people they cater for. Tackling poverty has

taken a new and broader dimension now escalating income and savings and building

the assets are not the only means to fight poverty. Tackling poverty points to

multidimensional essential health care, sanitation, food, nutrition basic hygiene,

establishing gender equality etc. (Ghalib, 2007).

Microfinance programmes target both economic and social poverty. The primary

objective of all microfinance programmes is poverty reduction. Poverty reduction is

perceived from the economic point of view. On the other hand, MFIs interventions

promote living condition of poor people by offering supportive services. These

supportive services are important indicators of human development (BRAC Annual

Report, 2005)

The objective of this program is to create sustainable changes in the lives and

livelihood of the poor, women in particular. As a strategy for removing poverty,

microfinance institution emphasize on improving the health of the poor, which is a

main concern worldwide and particularly in low-income countries, where the burden

of poverty disease is heaviest (Ghalib, 2007).

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According to Mondal (2006, P.1-3), microfinance is emerging tools for economic

development, poverty alleviation, empowering of low income communities and

contributing a new role in micro entrepreneurship. It has gained a prominent role in

developed and also developing countries. Development in social capital is a basic

ingredient of sustainable development in poor’s life and especially in society.

Ledgerwood (2000) defines social intermediation as the process of building the

human and social capital required by sustainable financial intermediation for the poor.

Social capital normally develops through group activities but individually.

Microfinance institutions support borrowers to form a group, select a leader of the

group, develop networks and working mutually to achieve their goals. Microfinance

institutions also support borrowers either in group or individual in different enterprise

development services like marketing business management and accounting training

and the management of small loans or credit. These supportive services provided by

MFIs play an important role in sustainable human development and livelihood (Khan,

Rahman 1998).

2.2.1 IMPACTS OF MICROFINANCE ON HOUSEHOLDS INCOME,

SAVINGS AND EXPENDITURE.

Since income, expenditure and saving are the basic measures of household’s welfare,

it is not surprising that microfinance impact studies almost always cover this issue in

evaluating studies.

2.2.2 IMPACT OF MICROFINANCE ON HOUSEHOLDS INCOME

Johnson and Rogaly (1997, p.122) state that NGOs aiming for poverty reduction need

to assess the impact of their services on user’s livelihood. They argue (1997) that in

addressing the question of the impactof microfinance, NGOs must go beyond

analyzing quantitative data detailing the numbers of users and volumes and size of

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loans disbursed, to addressing how their projects are impacting on clients (household)

income. They state (1997, p.118) that the provision of microfinance can give poor

households the means to increase their income.

Wright (2000, p.13) states that from the little research that has been conducted on the

impact of microfinance intervention on health and education, increase in income made

it possible

Microfinance interventions have also been shown to have a positive impact on

education of clients children as a result of increased in their income.

Littlefied, Murduch and Hashemi (2003, p.4) state that one of the first things that poor

households do with their income from microfinance is to invest in their children’s

educations.

Jeffery Sachs (2005) in a visit to a BRAC project found out that most of the women

he spoke to have their increased as a result of MF loans.

Hulme and Mosley (1996, p.109) in a comprehensive study on the use of

microfinance to combat poverty, argue that well-designed programmes can improves

incomes of poor and can move them out of poverty. They state that “there is clear

evidence that the impact of a loan on a borrower’s income is related to the level of

income” as these with high income levels have a greater range of investment

opportunities and so credit schemes are more likely to benefit the “middle and upper

poor” (1996, pp.109-112). They also show that when MFIs such as the Grameen Bank

and BRAC provided credit to very poor households, these households were able to

raise their incomes and their assets (1996, p.118).

2.2.3 IMPACT OF MICROFINANCE ON HOUSEHOLDS SAVINGS

There was a common belief among the scholars that many households in developing

countries are too poor to save. They argue that even the poor get some windfall

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income in excess of daily consumption, they spend on other social ceremonies, others

on the contrary argue that the poor can save if they get the chance but the problem

they faced is lack of access to formal financial institutions on the other hand some

scholars confirm that the poor can save like others do but most time the savings of the

poor is not visible. Menza (2016) to formal financial institution and also their savings

is in many forms such as savings in cash, in-kind especially in livestock form, and in

precious metal (Menza, 2016).

Microfinance Institutions increase opportunities for poor section of every society by

helping them to access credit and introducing the habit of saving (Menza, 2016).

Fiddler (1999) viewed access of financial services to the poor as a tool to escape from

poverty through investing in income generating activities and introducing the habit of

saving in rural poor households.

Coleman and Williams (2006) argued that the poor do save even though they do not

have complete access to savings facilities in formal financial institutions. Instead, the

poor use informal channels and not financial assets for their formal institutions.

General there two types of savings in Microfinance Institutions i.e. compulsory and

voluntary savings. Compulsory saving is normally imposed and starts simultaneously

with the loan that is approved for the individual who are program participants.

Compulsory saving used as collateral to protect loan defaults MFIs that require

compulsory savings as a condition of obtaining loan generally assume that poor

people must be taught to save and that they need to learn financial discipline. On the

other hand, voluntary saving is a type of saving in which an individual saves

depending on his/her willingness and it participants but also non-participants.

2.2.4 IMPACT ON HOUSEHOLDS EXPENDITURE

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The impact of microfinance on human capital investment expenditure is another area

many studies have looked at. Coleman (1999) finds that overall there is significant

impact on education expense.

Montgomery (2005) finds a mixed effect on education. She finds that the impact on

expenditure on education per child was significant using the total amount of loans and

number of loan cycle treatment variables in addition, it was found that the impact on

the very poor (defined as the bottom quintile based on monthly per capita food

expenditure) is larger than the rest of the households.

Maldonado (2005) found a negative and statistically significant relationship between

the education gap and length of membership in microfinance program in two mainly

rural villages in Bolivia.

Montgomery (2005) using data from Pakistan, finds that the expenditure on health per

capita was not found to be significant affected by any of the treatment variables.

Coleman (1999) found a significant but negative impact on household medical

expenses and men’s health care using the total sample

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CHAPTER THREE

RESEARCH METHODOLOGY

3.1 INTRODUCTION

This chapter deals with the research design. It therefore, examines the ethical

considerations adopted to gather information for the study. It focuses on the study

area, population of interest sample and sampling techniques and procedures, methods

of data collection. It winds up with data presentation and analysis ethical

consideration and organization of the study.

3.2 STUDY AREA

The impacts of microfinance in enhancing the livelihood of the clients are such that it

deserves a large coverage in order to examine its impacts on living standards of the

borrowers. However, owing to the limited time and other resources constraints

coupled with the COVID-19 Pandemic outbreak, large coverage could not be possible.

Therefore, the study is restricted to Makeni Municipality. The city of Makeni is one

Sierra Leone’s six municipalities and is locally governed by a directly elected city

council, known as the Makeni city council headed by a Mayor. The Mayor and the

members of the makeni city council are directly elected every four years in a

municipality election. Makeni city, which is commonly known as Makeni City, is the

third largest city in Sierra Leone by geographical location, and is also the largest city

in the northern province of Sierra Leone. It is the capital and the main administrative

center for the Southern region and lies approximately 160 miles (250Km) north, north

west of Freetown.

3.3 RESEARCH DESIGN

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Every research work has a frame work for collecting data base on the nature and type

of the research. A research design is the methodological structure within which

research is conduced. A survey research design was chosen because the research

needs to collect first hand data to measure the impact of microfinance on the living

standards of borrowers in the study community. The research sample elements and

variables that are being studied are simply being observed as they are without making

any attempt to control or manipulate them. The independent variables are the

characteristics related to microfinance services and product while the dependent

variable is the microfinance intervention as a way of improving the living standard of

the borrowers.

3.4.0 POPULATION, SAMPLE AND SAMPLING METHOD

3.4.1 The Population of Interest

Population in research is the total number of individuals/objects who qualify as

participants in a study. Given the nature of the research topic, the target population of

the study comprises all microfinance clients who must have engaged in one form of

economic activities for what they have accessed any microfinance product. However,

preference will be given to micro women entrepreneurs who have been engaged in

microfinance activities for at least two years. The choice for the people with a long

experience in microfinance activities is because they are well informed and know

much about the pros and cons about microfinance activities so they can reflect better

to the research questions.

3.4.2 Sample Size

A sample of a population is a selected number of individuals, objects from the

population as a representative and contains characteristics of the population for

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inferential statistics. A sample of sixty (60) customers will be selected from the

population as the sample size of this research.

3.4.3 Sampling method

Sampling is the process of selecting units from a population of interest so that by

studying the sample a researcher may fairly generalize the results back to the

population form which the sample was chosen. A purposive sampling method will be

used to select the sample respondents for this study. Purposive sampling is also

known as judgmental technique and it is the selection of subjects who the researcher

believes or presumes is typical of the population to be studied.

3.5.0 DATA COLLECTION METHOD

There are mainly two kinds of research methods. These are quantitative method and

qualitative method. These two methods differ in terms of the numeric (number) and

non-numeric (words) data. Quantitative method is predominantly used as a synonym

for any data collection technique such as questionnaire or data analysis procedures

such as graphs or statistics that generates or uses numerical data. On the other hand,

qualitative method is predominantly used as a synonym for any data collection

technique such as an interview or data analysis such as a categorizing data that

generates or uses non-numerical data.

However, both quantitative and qualitative methods are used because it is not easy to

express the impact of microfinance on living standards with the help of few sentences.

On one hand, some impacts can be shown only in numerical figures like savings and

income, while on the other hand, other impacts can be expressed only in descriptive

ways like access to education, business experience etc.

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3.6 SOURCES OF DATA

Two main data sources were used in this research work. These are the primary data

sources and the secondary data sources.

3.6.1 Primary Data Source

This is the kind of data that is collected by the researcher or investigator himself or his

agent and used for the specific purpose for what it was intentionally collected. The

primary data collection instruments include;

Structured Questionnaire: This is used to solicit information on the support services

received from the microfinance institutions by the borrowers. The questionnaire

comprised of background questions about gender age, education and number of

family members and general questions related to income, savings, capital,

consumption etc as a way of measuring the impact of microfinance on living

standards of borrowers. The questionnaire also provided respondents with multiple

choices check list of possible answers with the aim of making it easy for the

respondents as well as the researcher.

Structured Interview: This will be carried out with the use of questionnaire what

will be administered to the respondents through face – to – face interview to ensure

direct feedback from the respondents and to make any necessary corrections or

amendment on the questionnaire. The interviewer and interviewees administration of

the questionnaire will be used because most of the respondents are expected to be

illiterate; therefore, self-administration of the questionnaire is not appropriate.

3.6.2 Secondary Data Sources

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Reviewing previous studies on microfinance programmes in Sierra Leone and other

countries through the internet, books, articles, websites etc. provided a good

background for understanding these microfinance programmes; their impact

assessment techniques, websites etc. provide a good background for understanding

these microfinance progrmmes; their impacts assessment techniques and kinds of

questionnaire used in research of this nature, all of which provided the basic for

undertaking this study.

3.7 DATA PRESENTATION AND ANALYSIS

This has to do with the relaying and presentation of the collected data in a way that

makes it easy for the end users to drawn judgment and conclusion. The data collected

in this research will be presented using descriptive statistical tools such as tables,

frequencies charts etc. in order to show the numerical characteristics of the findings to

arrive at easy and valid conclusions and recommendations.

3.8 ETHICAL CONSIDERATION

Ethical consideration was given the necessary attention so as to avoid personal

questions which could be embarrassing to the respondents. This also ensured that the

rights of the respondents were taken care of. As a result, respondents were not forced

to answer any question against their will. Permission was also sought to gain access to

those respondents. Despite the pandemic crisis in the country, efforts were made to

contact few microfinance clients who in turn informed others who happened to form

the study group of this study.

3.9 ORGANIZATION OF THE STUDY

This work is organized in five chapters. The first chapter of the study contains the

introduction, background information of the study, problem statement, research aim

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and objectives, research questions and limitations of the study, significance of the

study. The number two chapter which happens to be the literature review examines

the work of other researchers which provide a source of understanding the concept

definitions theories and empirical evidence of the topic. The third chapter deals with

methodology and procedures used to gather the relevant information to answer the

research questions raised in chapter one. The forth chapter deals with the result

presentation, discussion and interpretation of the summarized information. Finally, the

fifth chapter contains the summary of the major findings of the study, conclusion and

recommendations.

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CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF THE

RESEARCH FINDING

4.1 INTRODUCTION

Data presentation is the depiction or relaying of collected or summarized information

to the end-users in a more understandable, simple and accurate form. This chapter

entails the presentation and analysis of the data obtained from the field survey. This

aspect of the work begins with the analysis of the socio-demographic characteristics

of the population sample. The demographic factors include: the gender distribution of

the respondents, the age distribution, marital status, family and educational level of

the sample respondent. Consideration was given to those factors because of the

influence they have on the socio-economic life of individuals especially those in the

microfinance world. The subsequent part of this chapter deals with the analysis of the

views of the respondents regarding the questions on the objectives of the study.

4.2 DEMOGRAPHIC INFORMATION OF THE RESPONDENTS

Table 4.1: Gender distribution of the respondents

Gender Frequency Percentage%

Male 26 43

Female 34 57

Total 60 100

Source: Field survey 2023.

This study attempts to minimize gender biasness. This is proven in the table (4.1) that

shows the fact that the male gender constituted 43% while the female made up of 57%

of the sample size. Therefore, there was no favoritism of a particular gender as the

male and female gender had almost equal portions in the study (table 1)

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Table 4.2: Age Distribution of the respondents

Age Distribution Frequency Percentage%

18 – 25 12 20

26 – 35 32 53

36 – 45 10 17

46 – 55 06 10

Over 56 years 0 -

Total 60 100

Source: Primary data from the field survey

In the study, the factor of age among respondents was also taken into account. The

group of respondents is shown in table (4.2), especially between 18 years and above

50 years was involved in being questioned so as to gain insight among respondents

with various ages in the study. A total 70% of the respondents were between 26 to 45

years old (including 53% of 26 – 35 and 17% of 36 - 45 years respectively).

This indicates that the study was dominated by respondents who were adults.

Moreover, 20% of the respondents were between the age of 18 – 25 and only 10%

were between the ages of 46 – 55 years.

Table 4.3 Marital status of the respondents

Source: Source: Field survey 2023.

Marital status Frequency Percentage%

Single 15 25.0

Marital 20 33.3

Separated 18 30.0

Widow/widower 07 11.7

Total 60 100

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The analysis from the above table (4.3) shows that 67.7% of the sample respondents

are with a partner (these include 25% of them single, 30% are separated and 11.7 are

either widows or widowers). This result indicates unmarried men and women were

more involved in the study. They also further indicate that unmarried people involve

in micro-finance more than those with partners.

Table 4.4: Data representing the family size of the respondents

Family size Frequency Percentage%

1–4 18 30

5–9 22 37

10 – 14 14 23

More than 15 06 10

Total 60 100

Source: Source: Field survey 2023.

From the findings in table (4.4), it was noted that majority of the respondents have

family size between 5-9 (as indicated by 37% of the respondents). 30% of the

respondents have family size between 1-4, 28% have a family size between 10-14 and

only 10% have a family size above 15%. This result also indicated that majority of

microfinance clients are people who shoulder heavy responsibility as major of the

sample respondents have larger family size.

Table 4.5: Frequency distribution of educational of respondents

Educational level No of respondents Percentage%

No formal education 10 16.7

Basic education 30 50.0

Secondary education 15 25.0

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Tertiary education 05 08.3

Total 60 100

Source: Source: Field survey 2023.

As indicated on the table (4.5), 16.7% of the respondents interviewed said they do not

have a formal education. In order words, they did not go to school, 50% said they at

least have basic education i.e they can read and write, 25% said they went up to

secondary level of education and 8.3% said they proceeded onto the tertiary level. The

analysis of this information also implies that majority of the respondents are illiterate.

(These include 50% who have basic education, 25% who went to secondary level and

8.3% who proceeded to the tertiary level)

SECTION B: GENERAL INFORMATION ON THE OBJECTIVES OF THE

RESEARCH

Table 4.6: Relates to the question “Have you ever received any microfinance

product or services from any of the MFIs in Makeni”

Reponses No of respondents Percentages%

Yes 60 100

No 0 0

Not yet 0 0

Total 60 100

Source: Source: Field survey 2023.

In reference to the above table 4.6, all (100%) of the respondents interviewed

confirmed that they have received products or services from one of the Microfinance

Institutions in makeni. This result also indicated that the entire sample respondents

interviewed is client of one or more of the lot of Microfinance Institutions in Makeni.

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Table 4.7: Frequency distribution of the type of microfinance products or

services respondents have benefited from

Responses No of respondents

Microcredit (Loans) 30

Micro Savings 20

Micro Insurance 0

Microfinance Training 10

Total 60

Source: Source: Field survey 2023.

Figure 4.1: A sample bar chart showing the type of products or services received

by clients

Source: Source: Field survey 2023.

The analysis in the figure (4.1) on a simple bar chart above shows that majority of the

respondents interviewed confirmed that they have benefited from microfinance loans.

This represents 30 clients which are half of the respondents interviewed. 20 clients

mentioned micro saving and only 10 mentioned microfinance training. This result also

indicated that the major product clients obtained from microfinance institutions in the

study area is loan or microcredit.

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Table 4.8: Frequency distribution containing the reasons for the use of

microfinance product

Reasons for the use of MF No of respondents Percentage%

products

Income Generating activities 28 46.7

Asset building 05 8.3

Starting own business 10 16.7

Consumption or household 10 16.7

expenditure

Education of children 07 11.6

Total 60 100

Source: Source: Field survey 2023.

Referencing to the above table (4.8), 46.7% of the respondents confirmed that they

obtained microfinance loan for income generating activities (businesses), 8.3% said to

build their asset base i.e buying tangible fixed assets, 16.7% said to start up their own

businesses, 16.7% also said to finance household consumption expenditure and 11.6%

said to finance their children educational expenses. It can be deduced from the table

above that the greater number of the respondents took microfinance loans to invest in

income generating activities.

Table 4.9: Frequency and percentage distribution describing respondents’

opinion as regard to the statement “Income increases after accessing the

Microfinance Services”

Opinions/Responses No of respondents Percentages%

Strongly disagree 04 6.7

Disagree 06 10.0

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Agree 20 33.3

Strongly agree 30 50.0

Total 60 100

Source: Source: Field survey 2023.

From the findings in the table (4.9) above; it is noted that majority of the respondents

strongly agreed that their income increased after accessing the microfinance services.

This figure represents 50% of the total sampled respondents which is half of the

population sample. A significant number of the respondents also agreed to the

statement. The analysis also indicated that only 16.7% of the respondents who

disagreed with the statement (including 10% who disagreed and 6.7% who strongly

disagreed). Generally, from this analysis, it is concluded that the majority of the

sampled respondents experienced an increase in income after accessing microfinance

loans and other services.

Table 4.10: Response on “increased saving after accessing MFI’s services

Responses No. of respondents

Strongly disagree 20

Disagree 10

Agree 20

Strongly agree 10

Total 60

Source: Source: Field survey 2023.

Figure 4.2: A simple pie chart representing clients responses regarding the

statement “Increased savings after accessing MFIs Services”.

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Source: Source: Field survey 2023.

From the analysis of the findings in the above figure (4.2), 33.3% of the respondents

(representing 20 respondents) conceded that their savings had increased after

accessing the microfinance services 16.7% (i.e 10 respondents) disagree with the

statement, 33.3% (i.e 20 respondents) also confirmed by agreeing with the statement

and 16.7% (i.e 10 respondents) also strongly disagree. However, from the analysis,

majority of these clients/respondents (i.e including 20 who strongly agreed and 10

who agree) confirmed that their savings had increased after accessing the

microfinance services.

Table 4.11: Frequency and percentage distribution of respondents’ opinions

regarding “Better access to education better housing and increased in standards

of living” after accessing microfinance services

Conditions Strongly Agree Strongly Disagree Total

Agree disagree

Better access to education 20 18 12 10 60

Better housing 10 15 25 10 60

Increased in saving 20 20 10 10 60

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Increased in income 30 20 04 06 60

Source: Source: Field survey 2023.

The main objective of the study was to investigate the impact of microfinance on the

livelihood of the clients. This required the researcher to look into the indicators of

quality living standard including better access to education and housing and increased

in income and savings.

From the responses on the table (4.11), it was noted that the majority of the

respondents (i.e 33 including 20 who strongly agree and is 18 who agree) indicated

that their children had better access to education after accessing Microfinance

Institutions (MFIs) Services. However, 22 of the respondents (including 12 who

strongly disagree and 10 who disagreed) that they did not have access to better

education even after accessing MFIs Services.

On better housing condition, majority of the respondent (including 25 who strongly

disagree and 10 who disagree) indicated that they did not have access to better

housing even after accessing the microfinance institutions’ services. However,25 of

the respondents (including 10 who strongly agree and 15 who agree) indicated that

they were able to access better housing after accessing MFIs Services

To measure the standard of living of the respondents’ two very important indicators

were also examined. They include; increased in income and increased in savings.

From the table, majority of the respondents (including 20 who strongly agree and 20

who agree) indicated that their savings had increased after access Microfinance

Institutions (MFIs) Services and only few of the respondents (including 10 who

strongly disagree and 10 who disagree) that their savings had not increased even after

accessing microfinance institutions services. In the case of income, majority of the

respondents( including 30 who strongly agree and 20 who agree) that their income

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increased after accessing the microfinance loans and only few of the

respondents( including 4 who strongly disagree and 6 who disagree) that their income

had not increased even after accessing the microfinance loans.

Table 4.12: Relates to the question “has joining microfinance programme

improves your quality of life?”

Responses Number of respondents

Yes 50

No 10

Total 60

Source: Source: Field survey 2023.

Figure 4.3: A pie chart showing respondents’ opinions as regarding to whether

participating in microfinance improve their lives or not

Working
50
Yes = 60×360 = 300o

10
No = 60×360 = 60o

Source: Source: Field survey 2023.

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As indicated on the pie chart above (figure 4.3), the sectorial angle of 3000 represents

respondents who confirmed that joining microfinance programme has improved their

lives, and the sectorial angle of 600 represents respondents who confirmed that joining

microfinance programme has not improved their lives. However, the sectorial angle of

300 represents the majority of the respondents (i.e 50 of 60) and the sectorial angle of

60 represents the minority of the respondents (i.e 10 of 60). Therefore, it was

concluded that the microfinance programme improves the quality of the lives of the

majority of the clients in the study area.

Table 4.13: Frequency and percentage distribution of respondents’ ability to

response to their basic needs after accessing a loan

Responses Frequency Percentage%

Better before accessing the 15 25.0

loan

Better after accessing the 35 58.3

loan

Makes no difference 10 16.7

Total 60 100

Source: Source: Field survey 2023.

To measure the standards of livelihood of the clients/respondents, factor such as their

ability to response to their basic needs was also taken into consideration. As indicated

table (4.13) above, 25% of the respondents confirmed that they were able to response

to their basic heeds better before accessing the microfinance loan, 58.3% said they

were able to response their basic needs better after accessing the microfinance loans

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and 16.7% said taking microfinance loans makes no difference in responding to their

basic needs.

Table 4.14: Frequency and percentage distribution of respondents’ opinion

regarding the differences in terms of before and after accessing a loan in

affording to pay for services expenses such as medical, education, electricity and

water rate.

Responses No of respondents Percentage%

Better before joining the credit 14 23.3

programme

Better after joining the credit 42 70.0

programme

No difference 04 6.7

Total 60 100.00

Source: Source: Field survey 2023.

In reference to the above table (4.14), 23.3% of the sampled respondents confirmed

that they could respond better to medical expenses, educational and utility expenses

before joining the microfinance programme, 70% of them confirmed that they had

better responded to the above mentioned services better after they had joined the

microfinance programme and only 6.7%said there was no difference in responding to

such services before and or after joining the microfinance programme. From this

analysis it could be clearly seen that the majority of the respondents responded better

to the above services after they had joined the microfinance programme.

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 44

Table 4.15: Frequency and percentage distribution of sources of finance or credit

available to respondents before joining microfinance programme

Sources of credit/finance No of respondents

Family and friends 30

Local money lenders 20

Banks 10

Total 60

Figure 4.4: A simple bar chart showing the sources of financial/credit available

to respondents before joining microfinance programme

Source: Source: Field survey 2023.

As indicated on the simple bar chart in the above figure (4.4), majority of the sampled

respondents (i.e,two third of them) confirmed that their major source of finance or

credit before joining the microfinance programme, was from their families and friends,

one third of the respondents said their major source of finance or credit was from

local money lenders and only few (i.e 10) of them said from the banks.

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 45

Table 4.16: relates to the question “Did you normally get the amount you

requested for?”

Responses No of respondents

Yes 45

No 15

Total 60

Figure (4.5): A pie chart showing the responses to the question whether the client

get the amount they requested for.

45
Working Yes = 60 ×360 = 270

15
No = 60 ×360 = 90

Source: Source: Field survey 2023.

As indicated on the pie chart in the figure (4.5) above, 270o of the sectorial angle

represents the respondents who confirmed that they normally got the amount they

requested from the Microfinance Institutions and 90o of the sectorial angle represents

respondent who confirmed that they did not get the exact amount they requested from

the Microfinance Institution. This may be due to their debt capacity, the size of their

businesses and perhaps other reasons. The analysis above also indicates that the

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Microfinance Institutions meet the demands of the majority of their clients in the

study community.

Table 4.17: Frequency and percentage distribution of respondents’ opinion

regarding the interest rates charged by the Microfinance Institutions in the study

area.

Opinions/responses No of respondents Percentages%

Strongly Agree 10 16.7

Disagree 22 36.7

Agree 08 8.3

Strongly disagree 20 33.3

Total 60 100

Source: Source: Field survey 2023.

As indicated in the table (4.17) above, majority of the respondents (including 36.7%

who disagree and 33.3% who strongly disagree) confirmed that the interest rates

charged by the Microfinance Institution were not reasonable and only few

respondents (including 16.7% who strongly agree and 8.3% who agree) contended

that the interest rates charged by the microfinance institutions were reasonable. From

this analysis, it is reasonable to believe that the interest rates charged by most

Microfinance Institutions in the study community were high.

Table 4.18: Frequency and percentage distribution of respondents’ opinion

regarding the statement “Microfinance is an effective financial development tool

to alleviate poverty:

Opinions/responses No of respondents Percentages%

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Strongly agree 30 50.0

Disagree 08 8.3

Agree 12 20.0

Strongly disagree 10 16.7

Total 60 100.00

Source: Source: Field survey 2023.

Referencing to the above table (4.18), 50% of the respondents strongly agreed to the

claim that microfinance is an effective financial development tool to alleviate poverty,

8.3% disagree with the claim, 20% agree and 16.7% strongly agree. From this

analysis it is quite obvious to see that the majority of the respondents are supporting

the claim that microfinance is an effective financial development tool to alleviate

poverty.

Table 4.19: Relates to the question “How do you rate the effectiveness of

microfinance programme in poverty alleviation”

Responses/Rating Frequency Percentage%

Excellent 18 30.0

Good 25 41.7

Fairly good 10 16.7

Weak 07 11.6

Total 60 100

Source: Source: Field survey 2023.

As indicated in the table (4.19) above, 30% of the sampled respondents rated

microfinance programme as an excellent programme, 41.7% rated microfinance as

good, 16.7% considered it as fairly good and 11.6% said it is a weak tool to alleviate

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poverty. The result of this analysis shows that microfinance programme is a good and

effective programme to alleviate poverty in the study community.

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CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 INTRODUCTION

This chapter is the combination of the whole study and it contains and over view of

summary of the major findings of the research, conclusions and suggested

recommendations based on the findings established in the prior chapters.

5.2 SUMMARY OF THE PREVIOUS CHAPTERS

The chapter one of this work contains the general background information, problem

statement, research objectives, significance of the study, hypothesis and limitations of

the study. In chapter two, the work of some authors and writers and the opinions of

some authors cited were reviewed. Chapter three reflects the methods used for data

collection, population and sample size, sampling procedures and data presentation and

analysis. Finally, chapter four dealt with data presentation and analysis and discussion

of findings.

5.3 SUMMARY OF THE MAJOR RESEARCH FINDINGS FROM BOTH

PRIMARY DATA AND SECONDARY DATA

The main objective of the study was to investigate the impact of microfinance in

improving living standards of urban citizens in Makeni Municipality. It was noted

from the information gathered that out of the 60 surveys questionnaire directed to

respondents in the case study 60 were filled and returned. This translated to 100%

responses rate which is viewed excellent. This was due to the face –to- face

administration of the questionnaire.

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Since measuring the standard of living was the main aim of the study on microfinance,

demographic characteristics of the respondents such as gender, age, marital status,

family size and level of education were all examined. The study found out that

majority of the Micro entrepreneurs supported by Microfinance Institutions were

women, and aged between 26 – 35 years as indicated in tables 4.1and 4.2. It was also

revealed that the majority of clients were unmarried, i.e. either single, separated or

widows and widowers. They also have large family size.

As a measure of standards of living, factors such as increased income, increased in

savings, better housing condition and better access to education were all examined in

order to measure the living standards of the respondents. The results of this research

show a significant impact of microfinance on respondents “income and average

savings”. This supports the literature which identifies a positive impact of

microfinance in alleviating poverty (i.e Hossain, 1988 and Izahdker 1998).

The study reveals that majority of the sampled respondents could at least read and

write in other words they are literature. This is indicated in table 4.5 which shows that

50% of the respondents interviewed have basic educational background. Regarding

the types of microfinance products or services, majority confirmed that microfinance

loan is the product they frequently obtain from the Microfinance Institutions in the

study area. They further explained that (as indicated in table 4.8) the loans they

obtained from Microfinance Institutions were mainly used for income generating

activities such as trade and or commerce.

As regard to respondents’ ability to better respond to better educational facility for

their children and housing needs after accessing the loan, majority confirmed that they

better responded to better educational facility for their children and housing needs

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after accessing the microfinance loans. This also indicated that microfinance

intervention has been very instrumental to increasing the standard of living of the

clients in the study community.

As regards to increase in savings after receiving loans, majority of the respondents

affirmed that their savings increased after obtaining the microfinance loan product

and other services like financial literacy training and management of credit in general.

Majority of the respondents also affirmed that the quality of their lives improved

when they joined microfinance.

Considering the gender dimension in targeting criteria, it was found that almost all the

Microfinance Institutions prefer females as their target clients. However, this might be

a reflection of the fact that women can manage credit facility better than men or

women are more reliable to repay loan than men.

Considering the sources of finance before joining the Microfinance Programme,

majority of the respondents identified family members and friends as their main

sources of finance before they joined the Microfinance Institution. Finally, enhancing

the effectiveness of microfinance programmes requires an in-depth consideration for

the dual objectives of Microfinance Institutions (MFIs). As argued in the literature the

focus of microfinance institutions is in two folds: a business orientation to generate

sustainable financial resources instead of depending on unsustainable source of

finance (donors) and a poverty alleviation orientation to reach the poor and help them

overcome their poverty. Based on the field work and interviewed conducted, one gets

the impression that MFIs are more into business orientation than the social objective.

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5.4 CONCLUSION

The review of the several literature shows that microfinance programmes are

important tools in fighting poverty and increasing/improving on the standards of

living of the clients. Based on the literature review, microfinance programmes have

been importance financial development tools to fight poverty and improve the

standards of living of the clients. Overall, the study was able to achieve the aim of

assessing the impact of microfinance on the living standards of urban citizens.

However, despite the various challenges that affect Microfinance Institutions in

serving the clients, including the competitive pressure by commercial banks and

community banks in the provision of financial services to the clients, repayment

problems, inadequate staff training, poor record keeping and a lot of other problems,

the result of the finding of the study can still be concluded that the activities of

Microfinance Institutions go a long way in improving the living conditions of the

clients especially those in the urban areas

5.5 RECOMMENDATIONS

After reviewing the various literatures and analyzing the data collected from the

primary sources, by using the descriptive statistical tools, some problems were

identified as a result, recommendation have been provided below;

 The financial institution (s) whose role needs to be visible in promoting living

conditions of the poor is/are Microfinance Institution. However, concerns

were raised by majority of the respondents about the high interest rates charge

by the MFIs. On this note, the government and development partners should

endevour to provide financial assistant to the MFIs, so that they could provide

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the loans at a subsidize rate so that the loans become affordable to the poor

clients.

 It was also discovered during interview with the respondent that some

Microfinance Institutions in the study community required clients to pay other

charges like sitting fee, registration fee and forced savings which altogether

increase the borrowing cost for clients. Therefore, this research recommended

that the Microfinance Institutions in the study community must endevour to

adjust to reasonable amount that is affordable and cost effective on the loan

product so that clients can as well benefit from their services. It is also

recommended that the amount of loans givens to the clients should be

increased to propel transition from their living standards. The people given

access to micro-credit services should be allowed a grace period before they

start repaying the loans. This will give them maximum time to prepare for the

loan repayment schedules.

 The Microfinance Institutions must also endevour to restructure their training

contents to include improving their clients’ business skills. They should

organize regular training for their clients and the loan officers as well.

 Generally, microfinance was found to be an effective financial development

tool to alleviate poverty. This was confirmed by majority of the respondents

during the primary data collection survey and from the literature point of view

as well. Therefore, in order to make microfinance effective and sensitive to the

needs of the poor and low income earners, it is recommended that the

government through the Ministry of Finance and Economic Planning should

mainstream microfinance in the National Economic Policy. An agent should

be set up in the ministry to deal with microfinance issues.

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 Lastly, it is also recommended that Microfinance Institutions (MFIs) should

not only provide financial intermediation and enterprise development services,

but also social intermediation services. By so doing, microfinance would be in

a better position to serve the interest of the poor.

5.6 SUGGESTIONS FOR FURTHER STUDY

Due to resources constraints, this research could not deal with every aspect of the

impacts of microfinance on the socio economic improvement of the clients. It only

looks at the impact of Microfinance on the living standard of the clients which was

narrowed to Rokel Town Community in Makeni Municipality. Therefore, other

research should be carried out on other areas such as:

1. The impacts assessment of Microfinance on Entrepreneurial Development

2. Role of Microfinance in Reducing Gender Disparity

3. Role of Microfinance on Women Empowerment

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APPENDIX 1
Questionnaire

I’m studying Higher Diploma Program at ERNEST Bai Koroma University of

Science and Technology (EBKUST) Makeni Campus, School of social sciences. I

have designed the following questionnaire for the study of the impact of Microfinance

in enhancing human livelihood and unprivileged section of the society in Makeni and

further scope of development, which required for my dissertation work as an integral

part of my study. I would highly appreciate if you fill this two-page questionnaire. It

will take approximately 10-15 minutes. I expect your kind cooperation in this respect.

1. What is your gender?

Male Female

2. What is your age?

Less than 25 years (25-40) years 40 and above

3. Do you have any educational experience?

Not at all (1-5) Years (6-10) Years More than 10 Years

4. How many family members do you have?

Less than 2 members v

(2-5) Members More than 5 Members

5. Did you have any business experience before entering this program?

Yes No

6. What is the source of your initial capital?

Personal Savings Friends and relatives Loan from MFIs Others

7. What amount of loan you have received as a help from any of the MFIs in

Bangladesh (Amount in Bangladeshi Taka)?

Less than 5 thousand (5-10) thousand More than 10 thousand

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8. The numbers of following table indicates the degree of satisfaction or

agreement level (on a scale of 1-5*) of the household or a person after he or she

has received loan from a microfinance institution. Please circle the number,

which accurately reflects your opinion.

The rate of interest of micro credit is Strongly disagree Strongly agree

reasonable 1 2 3 4 5
The procedure of obtaining loans from Strongly disagree Strongly agree
MFIs is easier than conventional banking 1 2 3 4 5
The income has increased Strongly disagree Strongly agree
1 2 3 4 5
The savings has increased Strongly disagree Strongly agree
1 2 3 4 5
Better access to education Strongly disagree Strongly agree
1 2 3 4 5
Better access to healthcare Strongly disagree Strongly agree
1 2 3 4 5
Better Financial situation of the family Strongly disagree Strongly agree
1 2 3 4 5
Role in decision making process has Strongly disagree Strongly agree
increased 1 2 3 4 5
Operational assistance received from Strongly disagree Strongly agree
MFIs was helpful to run the business 1 2 3 4 5
Employment opportunities have increased Strongly disagree Strongly agree
1 2 3 4 5
Improvement in the living standard of the Strongly disagree Strongly agree
family 1 2 3 4 5
∗ ‘1’ represents the lowest level of satisfaction or high disagreement, whereas ‘5’
represents the highest level of satisfaction or high agreement Thank you very
much for your cooperation!

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