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Article
Publication date: 29 March 2022

Ernest Abaho, Rachel Mindra, Ester Agasha and Aminah Balunywa

The study examined the nature of the operation of informal savings groups. Emphasis was on their composition, the mode of financial transactions and sharing of financial proceeds…

187

Abstract

Purpose

The study examined the nature of the operation of informal savings groups. Emphasis was on their composition, the mode of financial transactions and sharing of financial proceeds, the impact of the savings and members loaning on the members' financial and business growth, and the perception of the members on the benefits of the savings. The study also profiled the significant challenges encountered by the groups.

Design/methodology/approach

The study adopted an exploratory research design. The point of saturation was achieved after 15 members of informal savings groups were interviewed. Data were analyzed using content analysis techniques with the aid of NVivo version 10 software, and verbatim tests were used to explain the emergent themes.

Findings

The findings indicate that informal savings groups are accessible, sustainable and inclusive financing alternatives for low-income earners. Group sizes range from 250 to 3 members. As a sign of commitment, a form of identification is required to join the group. Findings also indicate that group leaders are elected, and their term of service could be renewable. It was discovered that members join mainly to save in financial terms, and they have benefited both monetary and socially. The biggest challenge these groups face is that members default.

Practical implications

The study provides evidence that informal financial service providers are an effective alternative to business financing that leverage existing social structures that are predominant in Uganda.

Originality/value

The study provides a benchmark for understanding the dynamics, capabilities and challenges impeding the survival and growth of informal savings groups as critical components in Uganda's financial system.

Details

African Journal of Economic and Management Studies, vol. 13 no. 2
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 15 November 2021

Ester Agasha, Nixon Kamukama and Arthur Sserwanga

The purpose of this paper is to establish the mediating role of cost of capital in the relationship between capital structure and loan portfolio quality in Uganda's microfinance…

424

Abstract

Purpose

The purpose of this paper is to establish the mediating role of cost of capital in the relationship between capital structure and loan portfolio quality in Uganda's microfinance institutions (MFIs).

Design/methodology/approach

A cross-sectional research design was adopted to collect data and partial least squares structural equation modelling was used to test the study hypotheses.

Findings

Cost of capital partially mediates the relationship between capital structure and loan portfolio quality. Hence, cost of capital acts as a conduit through which capital structure affects loan portfolio quality.

Research limitations/implications

Cost of capital was generalized as financial and administrative costs. The impact of costs like dividend pay-outs, interest rates and/or loan covenants on loan portfolio quality could be investigated individually.

Practical implications

MFIs should be vigilant about loan recovery by using strategies like credit rationing to ensure timely repayments.

Originality/value

The study contributes to the ongoing academic debate by identifying the significant indirect role of cost of capital in explaining loan portfolio quality.

Details

African Journal of Economic and Management Studies, vol. 13 no. 1
Type: Research Article
ISSN: 2040-0705

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