Microfinance risk management, social mission and financial performance during the Covid-19 pandemic in Uganda
DOI:
https://doi.org/10.47672/ajf.1017Keywords:
Microfinance, risk management, social mission, financial performance, Covid-19Abstract
Introduction: Microfinance is an economic tool promoted to extend financial services to the vulnerable groups excluded from the formal financial institutions. The Covid-19 pandemic containment measures disrupted the economic activities of the poor and made it hard for microfinance institutions (MFIs) to reach out to poor.
Purpose: This paper sets out to investigate the relationship between microfinance institutions risk management, social mission and financial performance of MFIs during the Covid-19 pandemic in Uganda. The study objectives were to investigate the relationship between risk management and financial performance of MFIs during the Covid-19 pandemic in Uganda and to investigate the relationship between the microfinance social mission and financial performance of MFIs during the Covid-19 pandemic in Uganda.
Methodology: This was a cross sectional study that involved 53 respondents conveniently selected from six (6) MFIs from Central Uganda working in the area of credit. The data was collected during the late period of the year 2021 using a self -administered questionnaire and analysed using STATA 12 to generate both descriptive and inferential statistics.
Results: The study findings revealed the existence of a significant positive relationship between risk management and the social mission (0.88; ); risk management and financial performance (0.91; ); the social mission and financial performance (0.88; ). Collectively, the predictor variables explain 85% of the variation in microfinance financial performance (Adjusted R-squared 0.85; p<0.00).
Recommendations: It is recommended that while designing risk management strategies, the focus be put on the social mission that will translate in the attainment of the financial objective. Attempts should be made by policy makers to help MFIs design strategies that integrate the dual bottom line with the triple bottom line.
Downloads
References
Castellani, D., Niño-Zarazua, M., Pujia, V. E., & Garofalo, V. (2021, November). Covid-19 and the Financial Inclusion Value Chain. Research Digest. Retrieved February 19, 2022
Chong, F. (2021, July). Loan Delinquency: Some Determining Factors. Journal of Risk and Financial Management, 14(320), 1-7. doi:https://doi.org/10.3390/jrfm14070320
Dąbrowska, K., Koryński, P., & Pytkowska, J. (2020, September). Impact of COVID-19 Pandemic on the Microfinance Sector in Europe: Field Analysis and Policy Recommendations. Warsaw, Poland. Retrieved March 5, 2022, from http://mfc.org.pl/covid19
Foundation Grameen Credit Agricole. (2021). Covid-19: The impact of the crisis on microfinance institutions. Analyses and perspectives. (E. Campos, L. Foschi, & B. Dunkel, Eds.) Retrieved February 16, 2022
Froelich, M., Kemper, N., Poppe, R., Breda, V., & Richter, P. (2015). Microfinance and risk management: An impact evaluation of a financial education programme,AMK Cambodia. Geneva, Switzerland: International Labour Office. Retrieved February 7, 2022
Hobden, T., Kovacs, Z., & Amarger , M. (2021). How are microfinance institutions using technical assistance to address customer needs in the pandemic? Impact Study:025, CDC Investment Works. Retrieved February 7, 2022, from cdcgroup.com/insight
Kizza, J. (2021). Microfinance Services and the Clients' Socioeconomic Wellbeing During the Covid-19 Pandemic in Uganda. East African Journal of Business and Economics, 4(1), 93-105. doi:https://doi.org/10.37284/eajbe.4.1.510
Mendelson, S., Dassy, C., Erice, G., Rozas, D., & Afonso, J. S. (2020). The Covid-19 Financial Inclusion Compass: A special edition e-MFP survey of sector challenges & priorities. L-1631 Luxembourg: European Microfinance Platform. Retrieved February 7, 2022, from http://www.e-mfp.eu/
Navin, N., & Sinha, P. (2021). Social and financial performance of MFIs: complementary or compromise. XIMB Journal of Management, 18(1), 42-61. doi:10.1108/XJM-08-2020-0075
Okumu, I. M., Kavuma, S. N., & Bogere, G. (2021). Efficacy of Covid-19 Macro economic responses in Uganda. International Development Research Centre.
Tavakol, M., & Dennick, R. (2011, June 27). Making Sense of Cronbach's Alpha. International Journal of Medical Education, 2, 53-55. doi:http://dx.doi.org/10.5116/ijme.4dfb.8dfd
World Development Report. (2022). Supporting microfinance to sustain small businesses. World Development Report. Retrieved March 5, 2022, from https://openknowledge.worldbank.org/bitstream/handle/10986/36883/9781464817304_Spot3.1.pdf;jsessionid=68B993D5057ABCA3B4B1AA1BF369A428?sequence=22
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Dr. James Kizza (PhD), Namukasa Samali
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
