The Design Of Micro Credit Contracts And Micro Enterprise Finance In Uganda

Studies have shown that the negative effects of credit market inefficiencies are most felt by smaller firms. Therefore, in countries such as Uganda, where micro enterprises are at the bottom of the economic pyramid, moral hazard and adverse selection severely affect their ability to access formal credit hence limiting their growth potential. Microfinance has been heralded for its use of innovative lending methods to improve access to credit. The last decade has witnessed an unprecedented increase in the outreach of micro lending institutions and the development of financial products suited to the needs of the economically active poor, who often, are unable to obtain credit from mainstream financial institutions. This book analyzes the law and economics theories on access to credit and enterprise finance and based on case studies in Uganda, presents empirical findings of the promise and limits of contractual innovations in micro credit.

Contractual arrangements in microfinance are designed to overcome the problems of adverse selection and moral hazard that are prevalent in developing and low income countries. Micro credit lenders use “innovative” lending methods such as group lending, contingent credit and use of collateral substitutes to provide credit to those unable to borrow from mainstream financial institutions such commercial banks. However, despite growth of the microfinance industry in terms of outreach and product development, the businesses at the bottom end - micro enterprises - still face considerable access to credit constraints. A study of micro enterprise access to credit in Uganda revealed limiting factors such as the evolving nature of micro credit and its providers, the lack of flexibility in structuring micro loans, and the negative perceptions about loan application and screening processes. In addition, harsh expected consequences of default, the disincentives of contingent credit, and the blind sanctioning of default also negatively impact access to credit. The study involved 602 micro enterprises located in various parts of Uganda and 105 lending institutions including commercial banks, credit institutions, microfinance deposit taking institutions, microfinance non-deposit taking institutions and Savings and Credit Cooperatives and Savings and Credit Societies.

Beyond Micro-Credit sets out how Indian Micro-Finance Initiatives are combining micro-finance with a wide range of development goals, these include not only poverty alleviation through providing savings, credit and insurance services but also promoting livelihoods, empowering women, building people's organizations and changing institutions.

The purpose of the 'Microfinance Handbook' is to bring together in a single source guiding principles and tools that will promote sustainable microfinance and create viable institutions.

Communities around the world rely on forests for their livelihoods, and the sustainable development of small-scale, often family-run enterprises is increasingly recognised as a key to poverty reduction. This publication examines the needs of such small-scale enterprises for access to microfinance services, given the seasonal and often unpredictable nature of forest-based activities. It looks at different types of financial institutions (such as banks, non-governmental organisations, co-operatives and credit unions) as well as group lending, leasing, insurance and cash transfers. The strengths and weaknesses of different approaches are considered through four case studies which draw on experiences in Nepal, Guatemala, the Sudan and Peru.

Examines self employment schemes in seven OECD countries and looks at how microfinance can help bridge the credit gap. Presents the results of 45 surveys carried out in 1999 and 2000.