The capital structure and the performance of microfinance institutions

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Kampala International University. College of Economics and Management
This study focused on establishing the impact of Capital Structure on the performance of Nicroflnance Institutions (MFIs) in Uganda with a case study of Kampala district. Conceptually, a framework was developed by the researcher from the available literature relating to capital structure and performance of MFIs. A cross sectional research design was adopted and data was collected from both primary and secondary sources. The independent variable of the study was capital structure with sub variables as long and short—term debts. The dependent variable was performance with sub variables as default rates, outreach rates and profitability. The findings indicated that Microfinance Institutions (MFIs) have risen to the forefront as invaluable institutions in the development process to build a framework for poverty alleviation. Nevertheless, capital constraints have hindered the expansion of microfinance programs such that the demand for financial services still far exceeds the currently available supply. It has been observed that microfinance institutions have had various degrees of insatiability over the years. Thus, the question of how best to fund these programs is a key issue. Recognizing the potential of microfinance in the development process, this thesis examines the existing sources of funding for FIs in Uganda, and explores how changes in capital structure could to facilitate future growth and reduce default rates and financial sustainability of MFIs. The findings established a link between capital structure and key measures of MFI performance. On the basis of the findings, the study recommends that MFIs should develop strategies of accessing long-term sources of finance in order to able to expand their clientele base and hence outreach.
A thesis submitted to the School of Post Graduate Studies in partial fulfillment for the requirements for the award of the Masters Degree of Business Administration of Kampala International University
Microfinance, Performance, Capital, Microfinance institutions