Women and microcredit in rural agrarian households of Uganda: Match or mismatch between lender and borrower?

Abstract

The alignment of microfinance programs with the context and expectations of the recipients is critical for ensuring clients’ satisfaction and desired program outcomes. This study sought to investigate the extent to which the objectives and design of the BRAC microfinance program match the expectations, context and characteristics of female borrowers in a rural agrarian setting in Uganda. Quantitative and qualitative methods were used to obtain socio-demographic, personality and microenterprise (ME) characteristics of existing borrowers, incoming borrowers and non-borrowers and to obtain information about the microcredit program. We found that BRAC uses a modified Grameen group-lending model to provide small, high-interest rate production loans and follows a rigorous loan processing and recovery procedure. BRAC clients are mainly poor subsistence farmers who derive income from diverse farming and non-farm activities. The major objective to borrow is to meet lump-sum monetary needs usually for school fees and for investment in informal small non-farm businesses. Many borrowers use diverse sources of funds to meet repayment obligations. Defaulting on loans is quite low. The stress caused by weekly loan repayment and resolution of lump-sum cash needs were identified as reasons for women to stop borrowing. The limited loan amounts, the diversions of loans to non-production activities, the stages of the businesses and the weekly recovery program without a grace period may limit the contribution of these loans to ME expansion and increase in income.

A comparative study on the role of microcredit on agricultural production improvement among resource-poor rural women

“…This protocol places emphasis on security and profitability of loan repayments, with weekly loan repayments that commence the week after loan disbursement. This poses a mismatch with borrowers who focus on agricultural production, as a source of funds for loan repayment (Namayengo et al, 2016;Namayengo, 2017). As a result, the borrowers maybe shifting away from crop and animal production, which have a long lag phase between investment and output, and instead opt for non-farm activities with shorter gestation periods.…”

Loan Recovery Procedures in Tanzania: A Case of Selected Microfinance Institutions in Dar-Es-Salaam, Tanzania

“…The innovation in loan recovery seems crucial as situations can easily change and render farmers a genuine reason not to repay their loans. In Uganda, subsistence farmers' experience through BRAC loans, weekly repayment has guaranteed loan recovery; however, borrowers, especially women, stop borrowing due to associated repayment stress (Namayengo et al, 2016). Microfinance needs to rethink loan issuing, repayment and recovery strategies in serving smallholder farmers.…”

“…The catastrophe means whenever loan recovery procedures are intimidating and unprocedural; loan delinquency is an outcome of such acts (Gikurumi et al, 2015). However, when rigorous loan recovery procedures are intact, including adherence to reporting system as evidenced by MENA countries and BRAC microfinance in Uganda, repayment of loans is guaranteed (Ghosh, 2019;Namayengo et al, 2016).…”