Memoire Online - Impact of microfinance institutions in poverty alleviation in rural area in Rwanda case study COPEDU Ltd Rwamagana branch

I, SINDAHERA Olivier, hereby declare that the work presented is my original work and has never been presented elsewhere for any other academic qualification at any university or institution of higher learning.

DATE: ......................................................................................

ACKNOWLEDGEMENT

This laborious have been success without moral, financial support and guidance from various persons.

My thanks go to the government of Rwanda through the University of Rwanda for grating me access to university education scholarship. Equally the College of Businessand Economics observe mention tiresome efforts in searching for suitable lectures to prepare us for the challenges of this work.

I would like to express my appreciation to my supervision for his incomparable commitment during the course of this work. Although he had a lot to do, he was never too busy to receive me for advice.

I am particularly grateful to my brother and his wife, my sisters, my best friends for their immeasurable support rendered to me on study period.

I am indebted to thank my classmates in four year, my friends and roommates for cooperation we shared.

In finally, I would like to extend my sincere thanks and appreciation to those who supported my directly and indirectly in carrying out this dissertation.

LIST OF ABBREVIATIONS AND ACRONYMS

LIST OF TABLES

The study aimed at finding out the Impact of Micro Finance institutions credit services in poverty alleviation in rural areas of Rwanda with a case ofCOPEDU LtdRwamagana branch.

The research was carried out in COPEDU Ltdwhere 10 respondents were selected from COPEDU Ltdmanagers and employees and 20 respondents were selected from COPEDU Ltd's beneficiaries.

The main objective of the study was to determine whether Micro Finance institutions have an impact in alleviating poverty in rural areas of Rwanda.

In this study the main consideration was primary source of information, COPEDU Ltdrespondents were given questionnaires and finally interviewed in order to get the required data.

For the case of secondary data, documents related to Microfinance Institutions in alleviation poverty were reviewed, textbooks and magazines were consulted.

The major findings and recommendations of the study was that Microfinance Institutions contribute a lot to the poverty alleviation and for COPEDU Ltd, loans are issued to clients on the basis of credit associations, all members in COPEDU Ltd guarantee each other and bear responsibility of timely loan repayment. It was found out that Microfinance institutions do not offer adequate financial products and services adapted to low income brackets of the population and that beneficiaries are not contented with the rate of interest charged because they feel it is high.

There is a problem of insufficient funds to fulfill clients' demands and there is a general problem of lack information sharing as most of the employees are inexperienced and unqualified, calling Microfinance Institutions to make an improvement on them.

After analyzing and interpreting results, recommendations were made for effective and efficient operation of Microfinance Institutions in Rwanda as a way forward to poverty alleviation.

CHAPTER ONE:GENERAL INTRODUCTION

1.0:INTRODUCTION

Microfinance means all loans granted to a borrower, a person, entity or group of borrowers and solidarityguarantee, for financing activity of production, commercialization whose principles source of payment comes from sales and profit generated by such activities, once adequately verified ,for( Arelis 2000; 9).

A microfinance institution is an organization that offers finance services to low income operation. Almost all these institutions offer micro credit and only take bank small amount of savings from their borrowers, and not from the general public.

1.1: BACKGROUND OF THE STUDY

Rwanda is the one the poorest countries in the world located in central Africa. It is landlocked with low industrial production; its economy is almost based on agricultural productivity since almost 90% of the population occupies the agriculture sectors.

Since 1991, the existing literature has shown declining trends of income, employment, resources, savings, high population growth rate and general drop in the standard of living of population (world bank,1998;1)

Rwanda is faced with the combination of structural problems arising from bad policies in the past as consequence, Rwanda suffers from a weak revenue and export base ,vulnerability to price shocks, to low demand, saving and investment.The genocide in 1994, following by the serious problems including social, economic, political fabric,disintegrated aggravating the trends,where up to one million people were killed during the April-July genocide, where include high number of vulnerable citizens, substantial rural recapitalization, large population movement, high prison population.

Hence, it lend to destruction of social fabric loss of people's confidence and trust, increased poverty and vulnerability of Rwandan people where two millions people fled the country and after the events, around one million people who had fled in 1959-1994 returned. Since 1994, stability has been restored and the country has embarked on new path for development toward the Rwanda's vision 2020which identified long- run seven objectives and government of Rwanda has done much to meet the short term challenge of HIV/AIDS, shelter for homeless, demobilization

During the late 1980^sand early 1990^s poverty was increasing on national level and rose dramatically in 1994 due to the genocide to approximately 77.8% of households. In 1999, poverty has fallen consistently to about 67% of new poverty line created in 2001 estimates that 60% of population are living below it (PRSP2002) Also PRSP shows that although much has done to alleviate poverty, this shows that there a wide urban-rural gap, the gap between therich minority and the poor majority become wide, particularly when rural are compared to urban.

In this context the government's ultimate general objective is create a new social political and economic framework that must access the problems of the country. The Rwandan government has developed a policy that promotes the creation of the alternative ways of attaining income employment, a policy of setting up micro-finance institution financing organization which leads to economy development in the country.

According to the inventaire des intervenants en micro-finance au Rwanda, Funded by Canadian development cooperation May20^th 2000:19. Micro-finance institution serve in form of micro-credit and micro-finance became instrument in favor of rural poor. Micro-finance has taken to respond to community needs especially windows, foster families and farmers.They are vulnerable because of their inability to borrow from banks the highly needed working capital for carrying forward their income generating activities, because they are not credit worthy, lack security and are faced with cumbersome loans procedures, those with principal activity in the logic of durability and financial viability on the other hand or those with secondary activity and other complementary activities.

Although there are favorable conditions for development in Rwandan economy,people generally face the problem of lack of access to micro-enterprise investment credit, this is mostly in an economy being so poor, and the banking system in its operation lacks many financial credit facilities for many years.

The government of Rwanda has as of its priorities the promotion of micro-business through provision of finance and non-financial activities,many international and local non-governmental organizations trying to implement micro-finance activities. Those micro-finance or small cooperative banks provide financial services to the poor, These are dealing client savings and deposits but delivering loans following the individual lending in such a way the collateral is necessary, thiscan be in form of security or monthly salary whereby the employer has to guarantee the applicant.

Micro-finance institutions are institutions that legally accepted by the government of Rwanda. They refer to savings, loans, insurance transfer services and other financial products targeted at low profit in bid to reduce operation income clients.It is against this background that micro-finance is favored for alleviation poverty in rural areas in Rwanda. (World bank, 1999:4), this is possible given that actual targeted recipients are majority poor micro-credit seeks, which cannot be supplied by the traditional formal finance system.

The research on this area is to investigate the impact of Microfinance institution credit service in poverty alleviation in rural area in Rwanda where COPEDU ltd RWAMAGANA branch will be the case study.

1.2: STATEMENT OF THE PROBLEM

Rwandan economy has had several banks such as Regulatory bank, development banks, cooperative banks and commercial banks.Despite the existence of their formal financial credit services, poverty has remained on the increase as well The composition of these institutions in the rural areas is majorly micro and medium in nature.

These institutions that are the main employer and income earner to Rwandan nationals have difficulty in accessing credit facilities from formal financial institutions. This is due to formal financial requirements that do not favor demands of individual, micro, small and medium firms or enterprises. This mostly embarks on processing cost of credit collateral.

It is on this background that research aimed to investigate how microfinance institutions which have credit requirements of the vulnerable part of society that can benefit from credit allocation of formal financial system in the rural areas. Thus the study focused on how micro finance institutions are effective in bid to alleviate poverty in the rural areas. Through this of the problem that I want to know the changes encountered by the rural people actively involved in small business particularly in rural areas where COPEDU Ltd agency operates

1.3: OBJECTIVES OF THE STUDY

1.3.1: The general objective

The general objective of the study was to assess whether micro finance institutions services are contributing to poverty alleviation in rural areas.

1.3.2: The specific objectives

1. To assess the changes encountered by beneficiaries of COPEDU Ltd and outreach of micro finance institutions in a bid to alleviate poverty in rural.

2. To examine how the loan provided, how it is disbursed and its repayment from the beneficiaries.

3. To determine how micro finance institutions can be financed to alleviate poverty in rural areas of Rwanda.

4. To assess how micro finance institutions are effective in micro credit policies

5. To determine whether beneficiaries of COPEDU Ltd are happy for the interest rate on their savings.

1.4: RESEARCH QUESTIONS

1. What is contribution of micro finance institutions in poverty alleviation in rural areas?

3. Is there any the relationship between the alleviating poverty in rural areas and micro finance institutions?

1.5: RESEARCH HYPOTHESES

Hypothesis 1: Micro finance institutions services reduce the vulnerability of poor individuals and households in rural areas through provision of micro credits to protect against risk and cope with shocks.

1.6:SIGNIFICANCE OF THE STUDY

After carrying out the study the researcher found out that microfinanceinstitutions' role is applicable in rural areas in Rwanda.

- To the researcher, it helped the researcher to get equipped with knowledge and solving problems using research, by collecting all necessary information, analyzing and interpreting that information to provide solutions to problems. The research finding helped to researcher and other interested parties to assess the role of microfinance institutions in alleviating poverty in rural areas.

- To the institutions, the research was beneficial to institutions engaging in microfinance services to sideline their activities to suit requirement of the beneficiaries. Also it helped the finance institutions to strengthen the use of credit thus increasing credit facilities.

- To policy makers, the research was paramount by considering Government's anti-poverty drives. It presented the role of micro financeinstitutions in poverty alleviation in rural areas and acted as a basis for development. As well as formation of to enhance the activities of micro finance institutions.

1.7:SCOPE OF THE STUDY

The study targeted to find out if micro finance institutions in rural areas have any impact on poverty alleviation of rural people. Rwanda being a case of less developed countries with less economy, micro finance institutions has to be study to judge if they have impacted in alleviating poverty in rural areas.I decided to take a single micro finance institution as mystudy andits regulations regarding financing rural areas were also studied to judge if the micro finance institution had impacted to the rural people.

1.8:ORGANIZATION OF THE STUDY

- Chapter one is an introductory part covering the background to the study, statement of the problems, objectives of the study, research questions, research hypotheses, significance of the study, scope of the study and organization of the study.

- Chapter two contains the conceptual framework microfinance institutions. This includes the study of what other researchers have written about the topic under study.

- Chapter three is methodology used to collect data; this includes area of the study, research design, sources of data, sampling design, sample size and data processing and analysis and limitations encountered.

- Chapter four is the presentation of findings, interpretations of findings and the analysis of the data collected from the field survey through tabulation and coding.

- Chapter five which is the last chapter is summary of the major findings. Conclusion and recommendations are also given in this chapter.

CHAPTER TWO: LITERATURE REVIEW

2.0: INTRODUCTION

This chapter broadly aims to review the existing literature to arrive at conceptual understandings. It expands on definition of key terms according to different authors and these including; microfinance historical background and evolution,micro finance,micro finance institutions, characteristics of micro finance, poverty alleviation, detailed issues on poverty, poverty, role of micro finance institution, functions of microfinance institutions in Rwanda.

2.1: MICROFINANCE HISTORICAL AND BACKGROUND AND EVOLUTION

The concept of microfinance was developed three decades ago on the basis of its successful experience in Asia (Bangladesh) by Grameen Bank that grants credits to the poor. The Grameen Bank is concerned with marginalized people. It was introduced by Professor Muhammad YUNUS and was considered as a bank for the poor.It began operating since 1976 in the village of Jobra (in Indonesia). Since 1983, this project has been transformed into an independent bank by the Government Ordinance. In this study considers Muhammad YUNUS as the founder of the microfinance movement.

Thornton(2000; 22), talking about microfinance evolution, says that:[The microfinance phenomenon significantly expanded a few years ago. The success of microfinance institutions like the Grameen Bank in Bangladesh, the Banco Sol in Bolivia and many others elsewhere, was the origin of a generalized grip of consciousness that microfinance could play role in many domains towards the improvement of living standards of the poor, by facilitating access to financial services and job creation until the procurement of investors].

Regarding microfinance evolution, Robinson (2001; 53) also says «By the 1980's however, numerous institutions in many parts of the developing world were providing micro-credit and recovering their loans. The Grameen Bank `s group lending methodology, part of paradigm shift in microfinance, becomes widely adopted by institutions in many of the world.» The 1980's represent a turning point in the history of microfinance, by the end of that decade; the paradigm shift was well under way. Both the Grameen and BRI (Bank Rekyat Indonesia) showed that micro-finance institutions would reach more one million borrowers with very high repayment rates.

From the 1990`s until now, microfinance operates as an industry of its own as the same author continues to say, «By the late 1990, commercial microfinance was no long limited to a small group of scattered institutions. It was an industry, a fledgling industry, but a rapidly growing one» The microfinance approach is used all over the world as an instrument of poverty reduction because it gives easy access to credit the poor, especially women and other people excluded from the formal financial system because of their social and financial status. What is new in the Grameen Bank system, which is used in many microfinance institutions, is that consists of forming groups of five persons and asking each one in them to grant the repayment of the remaining four members of the group.

Today, microfinance institutions view permanent reduction of poverty by addressing the multiple dimension of poverty with the aim of reaching specific Millennium Development Goals (MDGs) in education, women's empowerment, and health, among others. Even if developing countries need to integrate microfinance programs, developed countries do also take it as an essential element in their financial system.

2.2: DEFINITION OF THE CONCEPT MICRO FINANCE

According toBarr,Michael (2005; 278). Microfinance is a form of financial development that has primarily focused on alleviatingpoverty through providing financial services to the poor. Most people think ofmicrofinance, if at all, as being about micro-credit i.e. lending small amounts of money tothe poor. Microfinance is not only this, but it also has a broader perspective which alsoincludes insurance, transactional services, and importantly, savings.

According to James Roth, «Microfinance is a bit of a catch all-term. Very broadly, itrefers to the provision of financial products targeted at low-income groups. Thesefinancial services include credit, savings and insurance products. A series of neologismshas emerged from the provision of these services, name micro-credit, micro-savings and micro-insurance»

The Canadian International Development Agency (CIDA) defines microfinance as, «theprovision of a broad range of financial services to poor, low income households andmicro-enterprises usually lacking access to formal financial institutions»

For (Arelis,2000;9)» Micro finance» means» all loans granted to a borrower, a person, entity or group of borrowers and solidarity guarantee, for financing activities of production, commercialization whose principle source of payment comes from sales and profits generated by such activities, once adequately verified»

According to Marguerite,(2002;5) defines microfinance as» small scale financial services- primarily credit and savings provided to people who farm, or fish or herd; who operates small enterprises or micro enterprises where goods are produced, repaired or sold, provide services, who work for wages or commission, who gain income from renting out small amounts of land, vehicles, machinery or tools; and to other individuals and groups at the local levels of developing countries, both rural and urban»

Here, one may say that micro-finance is the way in which savings and credit services can be availed to a variety of saving club, rotating saving and credit associations, and mutual insurance societies. Thus May microfinance may define as the granting of financial services to persons developing a socio-economic activity, having no access to commercial institutions. These are poor people without fixed income, who do not offer any required collateral to commercial institutions.

According to the RMF (Rwanda Microfinance Forum) (2002;6) is defined as development instrument by which populations excluded from the standard banking systems access decentralized financial services.

Therefore, microfinance programs generally target poor people who do not have access to classic banking and financial services to help them improve their financial situations. It enables poor people to meet them need for financial services and improve their standards of living. Financial services for the poor are the powerful instrument poverty reduction that enables the poor to build assets, increase incomes and reduce their vulnerability to economic stress.

2.3: MICROFINANCE INSTITUTION

A microfinance institution is an organization that offers financial services to low-income operation. Almost all these institutions offer micro credit and only take back small amount of savings from their borrowers, and not from the general public.To micro finance industry; micro finance refers to a wide range of organizations dedicated to provide financial services.

2.4: CHARACTERISTICS OF MICROFINANCE

Microfinance gives access to financial and non-financial services to low-income people,who wish to access money for starting or developing an income generation activity. Theindividual loans and savings of the poor clients are small. Microfinance came into beingfrom the appreciation that micro-entrepreneurs and some poorer clients can be `bankable', that is, they can repay, both the principal and interest, on time and also make savings,provided financial servicesare tailored to suit their needs.According to Murray U and Boros R(2002). Microfinance as a disciplinehas created financial products and services that together have enabled low-income peopleto become clients of a banking intermediary.

· Installments made up from both principal and interest, which amortized in course oftime.

· Higher interest rates on credit (higher than commercial bank rates but lower thanloan-shark rates), which reflect the labor-intensive work associated with making small loans and allowing the microfinance intermediary to become sustainable overtime.

· Short processing periods (between the completion of the application and the disbursement of the loan).

2.5: REFLECTIONS ABOUT THEORIES

One of the most important elements need to be discussed is that in which aspects theabove-mentioned theories are linked to our study. Firstly, we are going to investigate theimpact of microfinance institutions on poverty alleviation in rural areas in Rwanda. Incomeis one of the important elements of living standards as well as of savings. The MFIs areproviding loans to the poor not only to increase their income but also to mobilize theirsavings. By mobilizing savings, poor people can secure their future and feel safe. For thisreason, we have emphasized more to know the situation about the income and savings ofpoor community of the society.

Apart from these, other factors that contribute to human development, like education,level of access to treatment facilities and empowerment are also included in ourinvestigations as these variables are also related to the core program and methodology ofmicrofinance. We made endeavor to explore and find out to what extent the standard ofliving of poor people has been influenced since they joined the microfinance program.

From theory, we already know that how solidarity (Group lending) worksas a synergy of microfinance. Previous studies have also shown that solidarity is apowerful tool of microfinance to reduce the risk and to keep the capital safe.

Lack of liquidity or fund is one of the big problems for nascent entrepreneurs, who wantto set up the medium scale business. We will try to discover the nature of liquidityproblem by observing the range of initial capital that is borrowed from MFIs by thepeople.

2.6: MICROFINANCE INSTITUTIONS IN RWANDA

Microfinance institutions in Rwanda are operating under the law n^o 06/99 of 18 June 1999 relating to regulations governing banks and other financial institutions. The Rwanda central bank and ministry of finance and economic planning supervise activities of all MFIs and COOPECs in Rwanda. Microfinance institutions are grouped in the RMF. The microfinance sector in Rwanda comprises the UBPR, credit, savings clubs, insurance companies, tontines and other informal system. Therefore, they are formal microfinance system, which operates under license and informal microfinance system, which is generally observed between individual groups that are not known by the authority.

In 2002, the BNR adopted the instruction n^o 6/2002 regulating microfinance activities in Rwanda. Throughout this instruction, BNR seeks to develop microfinance programs in Rwandan society as follows; « so as to insure to the whole population secure to financial local community- based services so as to develop sound and professional MFIs and, to structure accordingly the microfinance sector in Rwanda»(BNR 2002;1).

In Rwanda, there are a growing number of savings and credit cooperatives whose objective is highly valuable to the Rwandan people whose income is still low. These cooperatives are set up to serve the population through provision of small loans whose interest is not too high. The wide spread savings and credit cooperatives among others are mentioned in the introductory part.

Numerous Grameen-like institutions in form of savings and loan cooperatives or COOPECs have sprouted. All these and many others operate under the umbrella of the Rwandan microfinance forum (RMF). The RMF is platform of organizations intervening in microfinance in Rwanda. It is the centre for exchange and a reflection on microfinance that was created in 1998. It's formerly begun operating in May 2002 with a primary objective of professionalizing and institutionalizing the microfinance sector in Rwanda. The national bank of Rwanda is also very much involved in the regulation of microfinance institutions.

The government of Rwanda has developed its poverty reduction strategy through extensive national consultation. The resultant Poverty Reduction Strategy paper (PRSP) was endorsed by the Boards of the World Bank and international monetary fund on August 12. 2002. The actions outlined in the PRSP fit within the overall vision of Rwanda's development as set out in vision 2020, which identifies the key objective that Rwanda needs to attain in order to become a middle-income country by 2020. Throughout the PRSP, microfinance is a key element for the achievement of the government of Rwanda's objectives

Microfinance institutions operation in Rwanda can be traced in the activities of Banque populaire and Duterimbere all of 1975 and 1987 respectively. Banque Populaire was formed through the request of Switzerland as micro project to Rwandan government. Duterimbere was established as an affiliated of women world working (UNDP 1997). Duterimbere provides loans to microfinance and small-scale enterprises that are owned by women. It has established a cooperative institution (COOPEDU) to coordinate loan programs and savings.

Microfinance was created in response to the need of poor who require small loan (micro-credit), however time; microfinance has come to include a wide range of services ranging from credit extension, saving mobilization.

2.7: MICROFINANCE IN DEVELOPING ECONOMIES

The importance and the power of microfinance to the poverty reduction gained recognition in recent years especially among individuals and institutions. They started with provision of micro-credit services, which involved high transaction costs. Microfinance gained prominence in 1980's although early experiment dates back 34 years such countries as Bangladesh and Brazil.

The success of microfinance has been a result of focusing on the poor least developing countries. According to the (New Times, 2006), loans are usually granted without usual collateral demanded by main stream banks and other financial institutions. The poverty is multi dimensional, by providing access to financial services; microfinance plays a role against poverty. The microfinance institutions provide incomes from various businesses that help not only in the business activities expansion but also contribute to households' income on food security, children's school education. Through to microfinance institutions, the women capacity, confidence and empowerment were building.

The business sector in Rwanda is dominated by both local and international organizations. They include international cooperation agencies, Embassies, UN organizations; projects through ministries and bank financial institutions. They intervene in microfinance sector by providing funds to facilitate credit distribution to the population. Most of the customers are from Banque populaire and that microfinance institution and ONG's are found in the all provinces but still this does not mean all population has access to financial services.

According to the World Bank(2002), Microfinance enhance the ability of poor household to increase incomes, build assets and reduce their vulnerability in terms of stress, especially women headed families.

According to the (TADAO Chino, 2003), ADB's microfinance development strategy focuses on mainly five areas;

· Developing financial infrastructure to broaden microfinance services and expand the participation of private institutions;

· Building viable institutions to enhance sustainability and expand outreach services;

· Supporting social intermediation to increase capacity of the poor in microfinance market.

2.8: THE ISSUE OF POVERTY

2.8.0: Introduction

Understanding poverty is essential if appropriate interventions are to be designed. There is need to know the causes of poverty in rural areas, government and NGO. It is necessary to know how far their addresses these causes of poverty.Therefore, this section reviews the literature and it covers definition of poverty and its extent and theories.

According to (Robinson M.1996;120), poverty is most fundamental social economic problem since there is need for survival and therefore, having the means to survive is universal.

Since 1990's, poverty has remains a pervasive problem in many developing countries and predominantly in rural areas.

Approximately 116 million of people in developing countries, which is one third of population in these countries are poor( Umalele ;1987;61), who pointed out that rural areas are more affected by poverty than in urban areas especially in Africa and Asia where rural poor account for more than 82%. For Rwanda communities, they have undertaken and carried out self-help projects including; building of roads, communal places, care of sick, the orphans, acting as moral obligations.

2.8.1:Definition of poverty

Poverty is a condition in which a person of community is deprived of the basic essentialsand necessities for a minimum standard of living. Since poverty is understood in manysenses, the basic essentials may be material resources such as food, safe drinking water and shelter, or they may be social resources such as access to information, education,health care, social status, political power, or the opportunity to develop meaningfulconnections with other people in society.

According to the World Bank's (1980) definition of poverty, «A condition of life socharacterized by malnutrition, illiteracy, and disease as to be beneath any reasonabledefinition of human decency». Ghalib Assad K. (2007)

The (World Bank 1998; 6), acknowledge that poverty can defined by considering different elements; level of income of population social indicators such as of illiteracy or asses to health care. So it defines poverty as condition of life characterized by malnutrition, diseases and no asses to health facilities, state of illiteracy.

Poverty is the social-economic phenomenon where by the resources available to a society are used to satisfy the needs the few while the majority do not have these necessities met (KUREIN 1986; 64).

According to (Thomas Stephen 1998; 6) Poverty is milt-dimensional phenomenon consisting of a number of different characteristics. He further indicated that incomes, demographic, health and education and social conditions found at community and households' levels need to be inclusive among those characteristics.

Poverty many refer to lack of physical necessities such as food and clothing, assets and incomes. It is perceived as a problem when levels of disposable income and resources are inadequate to support a minimum standard of living. So poverty is defined by many people living below specified minimum level of income, an imaginary internal poverty line and such line knows no limit and is independent of nation per capita income (Michael P. Todaro, 1994;261).

According to the Clark E. Cochman et al(1994; 208) defined poverty in two ways,namely;absolute and relative poverty.

Absolute poverty refers to minimum level of well being in nutrition, shelter, clothing, etc. Then what determines sufficient income is to maintain this level by considering family size and other factors such as ages of family members and location.

Relative poverty on the other hand does not relate to a particular level of material well being members of the society.

Here, a family is considered poor if its resources place it well below a normal standard of living no matter how extravagant that standard might be.

Thus relative poverty definition defines poverty as any family income below one half the nation's medium family income.

According to (Renate Schubert 1994; 18), relative poverty is where the subjects under consideration are poor in relation to others who remain to be more closely specified.

In the book entitled «Uganda growing out of poverty» defines poverty by using two approaches; relative and absolute poverty (World Bank 1993; 18).

Relative poverty means that some people are poorer than others. This is realized when the different between the richest and the poorest is intolerable. This is in the sense that the poor are deprived of many goods and services which others take for granted. In general, relative poverty is when the people are defined as the poor relation to the community they use as reference group.

Absolute poverty means that lack of food, assets and cash. It is a condition degraded by diseases, illiteracy and malnutrition to deny people basic human necessity.

It is thus a condition of not able to obtain the basic needs of life or where deprivation is severalthat basic needs of life can scarcely be met. It is important to remember that experience and effect of poverty are unique for each individual, household and community and that no two people experience it in the same way. For analytical and policy development purposes we need some standardized definitions of poverty at all these levels (PRSP:2000).

At an individual level, a man or a woman is considered poor if they are; confronted by a complex of inter-inked problems and can't solve them; do not have enough land, income and other resources to satisfy their basic needs.

At household level, land owned, household size and the characteristics of the head of households were important criteria for poverty definition.

At community level, the shortage of economic and social infrastructure and natural resources are important criteria for poverty analysis.

According to Tony Belton et al(1982;94), poverty is then essentially a relative concept, a condition measurable in terms of living standards and resources of any society at a particular time. For instance a person seen as poor in Britain in 1981 will have better absolutely living standard than someone living in the slums of Rio de Janeiro. People are poor in their incomes, even if adequate for survival, fall markedly below those of the community (Galbraith 1987; 252).

In generally; poverty can be defined as a state of «deprivation» which may take several forms; it may be personal, economic, social, cultural or political.

Personal or physical deprivation includes deprivation in term of health, nutrition, disability, human capital, emotional deprivation is and confidence.

Economic deprivation isin term of incomes, asset, access to market, access to public facilities and environment resources.

Cultural deprivation would mean people deprived of beliefs, knowledge, value, information and altitude.Political deprivation is seen in terms of deprivation of voice at local, provincial or national level.

Social deprivation involves barriers to full participation in social, political and economic life.

2.8.2: Measurement of poverty

According to (Mel come Gills 1987;78), the measurement of the amount of poverty existing in the country usually begins with the drawing of a poverty line( a line separating the poor from non poor) ideally this line should be defined in terms of householders' income per capita. Householders with income per capita below the poverty line are defined, as poor while those with the incomes above the poverty line are not poor.

The simplest measure of the extent of poverty is the use of the percentage of poor householders in total. Reduction of poverty would be measured through a fall in the percentage of poor household in total and also through increase in the absolute income of the poor PRSP point out three essential indicators that are used to measure poverty reduction;

At macro level, the first indicator measures resources allocation for a particular activity and thus refers percentage of funding for instance to social sector, particularly to the primary health and education. This may be represented as a percentage of GDP / GNP. These indicators essentially measure aggregate levels of inputs, usually expressed in monetary terms.

The second kind of economic indicator is the use of micro that measures actual outcomes, such as changes in households' income, mortality, and mobility, literacy and school enrolment rates.

The third indicator is a use of indicator to determine «perceptions and attitudes» both by the poor and non-poor.

2.8.3: Poverty in Rwanda

Rwanda is a landlocked country located in central Africa region. Uganda boards it to north, RDC to west, Tanzania to the East and Burundi to south. It covers a land area of 26338 Sq. km majority of which is mountainous and that is why it is called a country of a thousand hills. Rwandan population has an estimated of 12 million people and estimated 60% living under poverty line.

The country is largely dominated by agriculture as the main employer with 86.6% compared to 90% in the previous years. Agriculture is most dominant in rural areas and is the main contributor of GDP of 6% which is expected to be 8.9% by 2020, and the country is among the bottom of the list of very poor countries of the world.

Poverty situation in Rwanda has been of persistent nature for quite a long time and this, Rwanda has grouped among world's poorest by the world's development report and Rwanda's GDP per capital was estimated at US dollar 290 (World Bank:1998) compared to 250 US dollar in 2006.

Rwanda`s poverty is the outcome of both economic and historical factors. First the economic factor reflects a chronic failure to productivity increase in a context of large and growing population. This failure becomes increasingly evident in 1980's and early 1990's leading to several structural problems.

Second, the genocide of 1994 left a horrid legacy further impoverishing the country and leaving a number of specific problems and challenges.

2.8.3.1: Structural features

Economy of Rwanda had experienced high population growth and economic transformation has lagged behind. Although agricultural production per capita and crop yields were declining steadily since the mid 1980's, economic policy did not enough to encourage agriculture transformation. The country suffered massive terms of trade shock when international coffee prices fell. As result, per capita income fell sharply during the 1980's and early 1990's (MINECOFIN, 2002;8).

Rwanda now faces the following micro economic problems structural problems: low agriculture production, which was aggravated by the failure of past agriculture policies, low human resources development, especially in literacy and skills development ,limited employment opportunities, with an oversupply of unskilled workers in comparison to their low demand, high population growth and density, high transport costs, etc.

The failure to address those problems has contributed to an economy characterized:

Low measured private investment at only 8% of GDP in 1999. Net small holder investment in

Narrow revenue base averaging 8.7% of GDP in the period 1995-1997, compared to an average of 17.7% of GDP in sub-Saharan Africa.

Average weak export base of US Dollar 16 per capita compared to an average of US dollar 100 in sub-Saharan Africa, with heavy dependence on the export of agricultural products, particularly coffee and tea.

2.8.3.2: The Legacy of Genocide

Between April and July 1994, there was systematic campaign of genocide, where over one million of people were killed and three million fled into exile in neighboring countries. The capital stock and shelter were reduced both in the household and small business sectors. Country is now facing serious lack of infrastructure as result of destruction during the genocideand movements into are as previously sparsely populated.

Networks of social links, in rural and urban areas, were damaged, impending internal commerce, and more 107,000 people are awaiting trial for cases of genocide related crimes, imposing large economic burden both on state and on families responsible for feeding them. The war and genocide left 85,000 child-headed households, some of children have been absorbed into households and still facing burden of responsibility, high proportion of households are headed by women 34% in 1996 and female widows 21% in 1996 (World Bank).

In respect to above problems, microfinance institutions have been introduced opting in alleviating poverty.In recognition of the role that microfinance institutions play in poverty alleviation, several microfinance institutions have been set up.

2.8.4:Poverty in Africa

Poverty, to policy makers in Africa, has remained a sore for many years and many specialists have devised criterion to reducing this scourge. Poverty in Africa rose during the time of drought, famine, which led to increase in world food prices and importation of goods leading in high government expenditure approaches Kofi Adu-Nyako (1991; 2).

To compensate this expenditure, African governments were channeled to donor funds for users and cash poor to create poverty (Umalele and Kofi-Nyako 1991; 2)

There are some regions in Africa south of Sahara that are found especially behind other developing countries and they include; Benin, Togo, Burkina Faso, Rwanda, Ethiopia, where by an estimated life expectancy is 54 years compared to 64 in developing countries.

Compared to 172 for south Asia, primary school enrolment; for Sub- Saharan is 56%after 74% of Asia, 81% for India and about 91% in Latin America and East Asia (Umalele and Adu- Nyako 1991; 2)

Nyako further notes that Word Bank development report of 1990 points out that poverty in Africa countries is rural based hereby 96% in Kenya, 80% in Ghana were largely recognized 1980. The high incidence of poverty is recognized in food crop producers and cash crop producers since most of incomes of the poor are derived from age employment in agriculture.

2.8.5: Poverty alleviation

According to the (World Bank 1998), poverty alleviation is a process whereby action is taken to reduce the agony that is inflicted on a group of people by poverty. It could mean equipping the society with means of attaining previously lacking social, economic and political essential needs for a decent life.

2.9: REFLECTIONS ABOUT MICROFINANCE AND POVERTY ALLEVIATION

According to the( NMFR, 2005,3): National micro finance policy for Rwanda, the interest in micro finance has burgeoned during the last decades; multilateral lending agencies, developing and developed country governments, and non-governmental organizations, all support the development of micro finance. Despite this development, financial markets in most developing countries are prepared to provide efficient and effectivefinancial services, to low income households.

Majorities of Rwandans, whose incomes are very low, have limited access to financial services and micro finance institution offers the possibilities of managing scared households and enterprise resources more efficiently.The micro finance services can be critical element of poverty alleviation strategy. Improved access and efficient savings, credit, and insurance facilities can enable the poor to smoothen consumption, manage their risks, build their assets, develop their micro enterprises enhance earning capacity.

Micro finance services can also contribute to the improvement of resource allocation, adoption of better technology and provision of markets. Thus micro finance helps to promote economic growth and development. Savings services are among the most beneficial services for low- income people. Nearly all households need to save to protect themselves from periods of low-income and to cover large anticipated expenses. The enterprises need to store the value accumulate from profit until they can invest them to earn return. Others, thus broadening outreach can use the savings kept as funds investment.

Like some services as savings, credit services can allow enterprises and families to make some important investment. Enterprises use this credit as source of short-term working capital and long-term investment capital. The households use it to meet consumption needs, particularly during when income flows are low.

Without permanent to institutional finance, most poor households continue to rely on self-finance or informal source of micro finance, which limits their ability to actively participate in development opportunities. Micro finance institutions can contribute to the development of overall financial system through the introduction of financial markets.

Micro finance can provide an effective way to assist and empower women, who make up significant proportion of the poor and suffer from poverty.

In brief, micro finance addresses the financial needs of significant portion of our population. Micro finance institutions are mainly the facilities of underlying economic opportunities that lead to poverty alleviation on rural areas of Rwanda and economic prosperity in general.

CHAPTER THREE: RESEARCH METHOD S

3.0: INTRODUCTION

The research methods refer to a set of methods and principles that are used when studying a particular kind of work. The research methods according to Grinnell and Williams (1990:42) refer to a number of ways arriving at the knowledge. The methodology comprises on intellectuals process, on orderly system of the arrangement that enable one to reach the aspect of knowledge. It is conceptual process that co-ordinates a set of investigation operations and techniques.

This research study attempts to show the impact of microfinance institutions credit service in poverty alleviation on rural areas in Rwanda.

This chapter describes and discusses methods and technique used in data collection and processing. It also point out the sources of data, methods of sample collection, data collection measurements and processing technique and problems encountered.

3.1: RESEARCH DESIGN

Kenneth D. Bailey (1978:7) stated that, research design is a stage in social research where the research must decide on how to measure the two main variables in this on her hypothesis and what group of people on whom to test the hypothesis. He further said, this involves deciding not only how many people will be used as subjects but also what their particular characteristics should be and under what circumstances the data while be gathered.

Grinnell Jr and Williams (1990:41) defined that, research design as a careful systematic study or investigation in some field of knowledge, undertaken to establish some facts or principles. He further stated that, a research design is the total plan we use so to assist in answering our research questions. He urges that, as part of our plan, we decide how the research question should be, required to answer it, from whom the data will be obtained and what is the best way to gather that data. Regarding this study, descriptive and explanatory design was used on questionnaire and interview schedule.

3.2: SOURCE OF DATA COLLECTIONS

In conducting the research study, the required data was gathered from both primary and secondary data sources. The information required was to help the research attain the set objective as indicated in table 3.1 for the attainment of each objective; it needs to obtain at least both primary and secondary data from different sources.

According to Hornsby et al (1963:2490),defines data as facts or things certainly known and form when conclusion may drown, in conducting research study, the required data was gathered from both primary and secondary data.

3.2.1: Primary data

According to Audrey J. et al(1989;57), primary sources come straight from the people you are researching from and are therefore the most direct kinds of information you can collect. Primary data is said to be the first hand observation and investigation. This was used in the research where the people were asked their views on microfinance credit or grants they get from the company, condition put on them in order to get loans, and time it takes them to get credit by relating to the growth of their business units.

Robert Ferber and P. Verdoom (1970:45) argued that, sometimes primary data will be collected by means of survey, sometimes from company records or others source material. With a regard to the study, primary data was obtained from operational and customers and excise departments and employees of different sections of COPEDU ltd through questionnaires, interview schedules and observation method. According Joel and Berman (1982; 63), argue that primary data are those collected to solve the specific problem under investigation. Primary data are necessary when a thorough analysis of the secondary data is unable to resolve the research problem

3.3: AREA OF THE STUDY

The study was carried out in COPEDU Ltd This is due to the fact that, it is the microfinance which works with low and middle income people.

3.4: SAMPLE, SAMPLE SIZE AND SAMPLE SELECTION

3.4.1: Sampling

Most data are collected using sample. This means that you collect data from a respective group of people or things, and use this sample to estimate the characteristic of all people or things (Donald Waters).

Grinnell and Williams (1990:132), defined sampling as the process of selecting people or cases to take parts a research study.

Bailey D.K (1978:70) state that sampling was highlighted as an importance by noting that, ideally we would like the study of entire population or universe also to give more weight to our finding. However we are unable to study the entire population and must settle for a sample.

3.4.2:Sample size

According to Grinnell Jr. and Williams Margaret (1990:133) defines a sample size as the number of people or objects in the sample. They further said on (P.127) that the sample size depends on how homogeneous our population is with respect to the variable we are studying.

Category of population	population	Sample	Percentage
COPEDU Ltd officers and its employees	15	10	33%
Customers	30	20	67%
Total	45	30	100%

3.5: TECHNIQUE OF DATA COLLECTION

The method that employed in the study were those found necessary in relation to data that was needed for descriptive and analytical study especially the questionnaire, interviews, and documentation like reports, files, surveys, most respondents were from within the organization. These are tools that gather data from the respondents and other sources that are relevant to the study.

3.6: DATA COLLECTION

3.6.1: Questionnaires.

Grinnell and Williams (1990:228) defined a questionnaire as a method used for collecting data, as a set of written question which calls for response on the part of the client, may be either self-administered or group-administered. Kendall (1992:135) says that, a questionnaire is an information gathering techniques that gathers information about the attitudes, beliefs from several respondents, organization that may be affected by the system. Under this study the researcher-ended to use both the closed-ended questions and the open-ended questions in order to facilitate the work of the respondents and at the sometime to give the liberty of expressing their views.

3.6.1.1: Closed-ended questions

Grinnell and Williams (1990:228) asserted that, closed-ended question is a type of question or interview schedule or a survey instrument which limits the respondent's response by the use of pre-selected alternatives.

3.6.1.2: Open-ended questions

According to Grinnell and Williams (1990:228), an open-ended question, is the type of question or on the interview schedule or a surveying instrument which does not limits the respondents responses to any pre-selected alternatives.

3.6.2: Interview

According to Gilbert A.Churchill Jr (1992:264), depth interview is an instructed personal interview in which interviewer attempt to get the subject to talk freely and express his or her true feeling. The aim here was to found out what the responds do, know, and think orfeel about the something asked. In this the face to face interview was carried out to avoid some inaccurate at answering

3.6.3: Documentary study

Kenneth D. Bailey (1978:266), defined document as a careful reading, understanding and analysis of any written materials that contain the information about the phenomena you wish to study. Kenneth further stated that, some are primary documents or eyewitness accounts written by people who experienced the particular event or behavior.

Within this study, the instrument was applied. Both types of documents were obtained but more preferably considered was primary document which includes; chart accounts, procedures manual, and some microfinance report .

The researcher also used electronic means to get information on different issues in as far as research problem is concerned. This is by consulting on Internet websites with related information on the research.

3.6.4: Observation

According to Rwigamba (2001:46), an «observation» is the primary techniques for collecting data on the non verbal behavior. Although observation commonly involves sight or visual data collection via other senses such as hearing, touching and smelling» Observation will be used especially to categories of those respondents who do not reveal their personal status with regard to what they own or any other research information.

3.6.5: Data processing

Once the set of data is collected it must be carefully prepared for tabulation analysis and interpretation. The editing, coding and transcribing process are extremely important. Responses are scrutinized for completeness and for errors (Mark and David 1990:22)

3.6.5.1: Editing

Gilbert Churchill (1992:51) defined editing as inspection and correction, if necessary, of each questionnaire or observation form. In the process of editing the data collection forms must scanned to be sure that they are complete, consistent, and the questionnaire are identified whenever possible. after collecting the data, the practice of inspection of editing was exercised in order to discover items that would be misunderstood by responds, to detect gaps and others weakness in the data collection methods.

3.6.5.2: Coding

Mannheim and C. Rich (1995:440) asserted that coding is the process of assigning numerical values to represent values on variables. After being edited the data was coded where the numbers were assigned to each of the answer so that they could be easily summarized and analyzed.

3.6.5.3: Tabulation

According to Gilbert Churchill (1992:51), tabulation refers to the orderly arrangement of data in table on other summary format achieved by counting the frequency of response to each question. He further mentioned that, at this point the data might also be cross-classified by other variables. The statistical table will be used to compare number of occurrences of each answer to the question asked. Up to this level, it is through mathematical and statistical tables that the numbers of occurrence of each answer in relative to the question asked was converted into percentage to make it so clear that one can get the message in complete.

3.7. LIMITATIONS OF STUDY

Although the exercise of data collection was successful, the researcher faced some problems in the process of conducting this research;

· The researcher encountered constraint of time to carry out time series data like those of financial self-sustainability that ascertained earnings of each beneficiary. Collecting, compiling and submission were not enough.

· Money was another constraint given that cost of transport was high,interviewing beneficiaries was difficult and the researcher faced difficulty in transforming responses to required information.

· There was a problem of little understanding of what the questionnairesrequired from some of the respondents to low levels of education of some beneficiaries of microfinance. Most of the time, it required the researcher to be close to respondents to explain what was required in those questionnaires.

· The researcher faced the problem of lack of commitment of some respondents who reluctantly provided information on some ventures. It was after some face to face explanation that the respondents were finally convinced and free to talk their ventures during interview.

Observation these constraints required serious concentration and decisions making evaluation on programs of the poor in rural areas. The population was not covered because time allotted was not sufficient for the study. Therefore the study was done on sample other than population.

CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION

4.0: INTRODUCTION

This chapter deals with the data collected during the research to enable the researcher fulfill the objectives of the study. It shows the analysis, findings, interpretation and subsequent inferences from the data researched. It summarizes into three parts:

4.1: PARTI: PROFILE OF COPEDU Ltd MICROFINANCE

4.1.1: Historical background of COPEDU Ltd

COPEDU Ltd is a microfinance institution that offers savings and credits services for its shareholders and customers. It is registered as a company in Rwanda development Board (RDB) and licensed by the central bank (National Bank of Rwanda).

It was initially called COOPEDU-KIGALI because its activities were only limited in Kigali city and the former Kigali rural.

COOPEDU-Kigali was initialed by a non-profit organization known as DUTERIMBERE a.s.b.l on 15^th, June, 1997. Initially, DUTERIMBERE a.s.b.l had a small savings and credit program and after its rating. It was the creation of COOPEDU were the assessment of this program showed that savings and credit services which were initially offered by DUTERIMBERE a.s.b.l would have been more effective and efficient if they had been offered within an independent cooperative institution. As a result, a non-profit organization DUTERIMBERE a.s.b.l decided to be the primary promoter of the recommended cooperative, by creating COOPEDU.

In 2009 COOPEDU-Kigali changed its name to COOPEDU by the decision of its general assembly which was held in October 2009.

In 2012, general assembly of December 22 decided to transform cooperative COOPEDU as a saving and credit cooperative into a commercial company. However a public limited Liability Company known as COOPEDU Ltd is registered by RDB.

4.1.2:Mission

COPEDU Ltd is the Microfinance institution whose mission is to provide inclusive financial services for socio-economic development of its customers.

4.1.3: Vision

4.1.4: Values

4.1.5: Products

4.2: PARTII: RESPONSES FROM COPEDU 'S MANAGER AND EMPLOYEES.

This part presents data collected resulting from respondents `views as the researcher interviewed them. Basically the information collected was interpreted and analyzed them.

Table 2:Responses on characteristics of employees of COPEDU Ltd

Characteristics

Categories

Frequency

Percentages(%)

Sex

Male

Female

Education

Qualification

Primary level

Secondary level

University level

Experience in years

In intervals

5 month

5 month-1 year

1 year-5 years

5 years-10 years

10 years and above

Age

20-30

30-40

40-50

50 and above

The research also considered sex, education qualification, age and experience in C0PEDU Ltd. These are indicated in the table 2 and explained below:

The sex, education qualification and the experience in working employees of C0PEDU Ltdwere taken into consideration during the research study. This reveals that, the majority of the employees were femaleemployees with 60% while male represents 40%. This indicates that C0PEDU Ltd employs more women than men and there are no criteria for male and female allocation of job.

The research study also considered the education qualification and education levels were recorded. The secondary level contributing 20% of the total number of employees, followedby university level with 80%, and primary level with 0%.This implies that the majority of COPEDU Ltd employees are university level. The researcher further considered the experience ofCOPEDU Ltd employees as far as experience in microfinance institution is concerned, in increasing the turnover of microfinance. The study shows that, the majority ofCOPEDU Ltdhas experience ranging from 1years-5years with 50% of total employees ofCOPEDU Ltd, followed by the others having experience ranging from 5 months-1 years ranking to 30% of total employees and experience ranging from 5 years-10 years with 20 % of total employees. This indicates that the majority ofCOPEDU Ltdemployees have a good experience in microfinance institution but unfortunately.

According to the responses from selected respondents as shown by the table2COPEDU Ltd have employees age ranging 20-50, the minority of the age are ranging 40-50 ages with 20%, followed by 20-30ageswith 30% and 30-40ages with 50%. This indicated thatCOPEDU Ltd has employees that are still in the age of working. This helpsCOPEDU Ltd to increase its production and reducing the risk of employing new employees and cost of training.

Responses	Number of respondents	Percentage (%)
Idea from somebody	4	40
Business opportunity	6	60
Total	10	100

Table 3 shows that 60% of respondents answered that the idea of starting up COPEDU Ltd comes up because of some existence of business opportunities. They thought of the idea because they wanted to strive to take advantage of their environment. And 40% of the respondents said that the idea came from views of other persons who had joined COPEDU Ltd for business. This means that they had causes of success or failure for theCOPEDU Ltdand they felt ready to take the right path.

Responses	Number of respondents	Percentage (%)
Personal money	0	0
Inherited	1	10
Contributions of members	4	40
Bank loans/grants	5	50
Total	10	100

Table 4 indicates clearly that most of the respondents 50% answered that,all the start, the sources of funds forCOPEDU Ltd was from bank loan /grants.Reasons advanced in favored of the above statement are that MFIs themselves had insufficient funds to star from the business, while 40% of respondents said that sources of funds came from the contributions of members who saw the business opportunity.

Responses	Number of respondents	Percentage (%)
Agree	4	40
Disagree	6	60
Total	10	100

Table 5indicates clearly that majority of respondents 60% said that customers do not agree with the compulsory savings, which is 20% of disbursed loan. This percentage acts as guarantee for the issue loan. The loan should be related to the savings injection.40% of respondents agree with the compulsory savings, reason being the increase ofnumber of customers in form of credits associations that are self formed and managed with the help of credit offers.

Reponses	Number of respondents	Percentage (%)
High	0	0
Low	10	100
Total	10	100

Table 6shows that100% of respondents answered that the savings level in the country is relatively low. The customers are interested in asking credits more than they want to save their money in the banks .poor saving culture is leading to higher levels of nonperformingloans causing reluctance in paying back loans. People do not earn regular incomes to meet their needs. Most of respondents answered that it is only possible when beneficiaries and other volunteers are sensitized to save willingly, this can be done through training especially to the productive poor.

Table 7: whether clients are educated on the importance of saving before they are given loans

Responses	Respondents	Percentage (%)
Yes	10	100
NO	0	0
Total	10	100

Table 7 shows that 100% of respondents answered that customer are educated on the importance ofsavings before they are given a loan through sensitizations to beneficiaries' compulsory savings and voluntary savings as well. They also educate clients on the use of savings through direct marketing by adverts, brochures. Direct contacts and this has made the number of clients increase dramatically.

The saving culture in Rwanda is improving to some extent by introduction of MFIs to some degree, but there is still a lot to be done. Clients have developed culture of savings by accepting 20% of granted loan.

Table 8: Responses on how long it takes COPEDU Ltd to process loan application

Responses	Number of respondents	Percentage(%)
2 weeks	10	100
1 months	0	0
5 months	0	0
Total	10	100

Table 8 shows that the researcher wanted to carry out how long it takesCOPEDU Ltd to process a loan application. Where 100% of respondents said that it takes 2 weeks to process loans application, indicating thatCOPEDU Ltdservice is quick hence efficiency.

Table 9:whether clients give collateral security in order to be given a loan

Responses	Number of respondents	Percentage (%)
Yes	7	70
No	3	30
Total	10	100

Table9the majority of respondents (70%) answered that clients give collateral security before acquiring the loan because they prefer giving collateral in terms of fixed asset;fittings and furniture to the group. They prefer giving group loans to individuals; where as 30% of respondents said that clients give collateral security in form of buildings, land, especially for cases of individuals, and an individual gets a loan if he/she has account inCOPEDU Ltd. Joint and several securities for a minimum of 5 persons are formed and normally considered strong. And a group of 10 and above can be formed, but who are considered poor whereby they give collateral security or guarantee themselves, and in case of any defaults, it affects every member inCOPEDU Ltd.

Table 10:Responses on whetherCOPEDU Ltdinstitution offers individual loans

Response	Number of respondents	Percentage (%)
Yes	10	100
No	0	0
Total	10	100

Table 10 shows that all respondents with 1000% answered that COPEDU Ltdinstitution offer individual loans. The evidence is that an individual loan requires credit history or collateral security. So 100% ofCOPEDU Ltdinstitution's respondents answered that they give individual loans which is a business.There is individual risk on repayment. So individual asks a loan only if he/she has an account inCOPEDU Ltd to prove security.

Responses	Number of respondents	Percentage (%)
Repayment condition	5	50
Low interest rate	3	30
Customer care	2	20
Total	10	100

Tables 11, shows that 50% of respondents reported that time for repayment of credits are negotiated between credit officers and clients. Hence giving them good repayment conditions and making them happy for their business with fair services,30% of respondents said that customers are happy out of subsidized or low interests charged, 20% of respondents said that are happy out of customer care.

4.2.3 WhetherCOPEDU Ltdrealizes profits

According to the researcher's analysis, most of institution's information reveals no much realized, COPEDU Ltdinclusive, causes being:

Insufficient funds: majority of respondents claim that there insufficient funds to meet the clients demands whose number steadily increasing especially women through sustainable micro enterprise. Only 35% of respondents' views regarded their institution as enjoying some profit since their approach to work is a team work through consultations and consensus.

Lack of effective information sharing regarding credits and payment records of borrowers.65% of respondents said that profits are not principally realized. Clients seek loans, which they do not repay in time and to the good reputation ofCOPEDU Ltd to its clients they are not immediately penalized, everything is negotiable with credit officials.

Administrative expenses ofCOPEDU Ltdhave many branches that of course requireserious renting.

Responses	Number of respondents	Percentage (%)
International NGOs	3	30
Embassies	0	-
Local NGOs	1	10
Depositors	6	60
Total	10	100

As we can see from the table 12 the majority of respondents with 60% said that, source of funds for most MFIs come from deposits, 30% of the respondents reported that source of funds is from international NGOs and10% of respondent said that source of funds is from local NGOs.

Table 13:capacity building programs undertaking by C0PEDU Ltd to alleviate poverty in rural areas

Responses	Number of respondents	Percentage
Empowerment	1	10
Business mgt and loan mgt	6	60
Training the staff members	3	30
Total	10	100

As it is observed from table 13 majority of respondents with 60% accept that capacity building programs undertaken byCOPEDU Ltd is business management and loan management becausetheir business rotates around loan management, loan size, repayment and proper circulation of the loan to other targeted people. While 30% of respondents said that a capacity building program undertaken is training of staff members. And 10 of respondents said that a capacity building programs undertaken is empowerment. This is especially for women headed households or undeserved women

4.2.4. Response on how micro finance institutions are helping the Rwandan rural poor population

.Micro finance institutions provide negotiable small loans to productive rural poor population;which increases their business welfare as case ofCOPEDU Ltd.

.Micro finance institutions give training to their clients about the use of loans in business through counseling and consultations about loan fund. Out of this clients end up adopting the culture of saving from these institutions. Majority of respondents (66%) revealed that MFIs are greatly helping the rural poor population to getting access to credit.

4.2.5. Answers to research questions

The first question as to kwon what objectives ofCOPEDU Ltdhad at the start. It was found out that objectives were part and parcel of their current operations now and were; spiritual and promoting total holistic transformation of Rwandese. Gender development especially women and other disadvantages population groups and helping existing business grow and encourage development of new ones.

The second question was to know what the impact ofCOPEDU Ltd towards poverty alleviation in rural areas. The research revealed out thatCOPEDU Ltd increasing incomes of the productive poor through having saving sustainable business, sensitizing clients on culture of savings, even little amount, offering simple loans to the poor people who have not been able to maintainneeds of life.

The third question was to know how MFIs can be financed greatly to alleviate poverty in rural areas of Rwanda. It was found out that MFIs can be financed greatly through government policy of granting those funds, exemption from taxes and duties from government, getting grants for loan fund from foreign institutions with low interests, savings mobilization and injection of new money from international bodies.

The fourth question was to know howCOPEDU Ltd has contributed to the customers' welfare. It was found out thatCOPEDU Ltd contributes a lot to customers' welfare in the following way; granting them loans. Some of the clients have constructed their own houses out of simple credits; others are able to feed themselves and their families, able to pay school fees for their children,

Providingthose services and products, credits, savings and business development services. Means that customers are now able to meet their daily expenditure.

The fifth question was to know the success or outreach of MFIs in bid to alleviate poverty in rural areas. The researcher found out those MFIs activities support income generation for the enterprises operated by low-income households. Many people testify that their level of living has changed. Education for their children is financed and more improved shelter has been built, high number of active clients leading to more savings poverty alleviation.

· COPEDU Ltd targets segments of population that has no proper access to business opportunities because of lack of markets, inputs and demand. Productive credit therefore, is no use to such people.

· To its best wishes,COPEDU Ltd has not reached either the minimum scale or the efficiency necessary to cover costs, due to lack of enough experienced and qualified manpower in the field of microfinance.

· Poor management of projects leading to irregularity in repayment of the granted loan.

· Failure to manage funds adequately enough to meet future cash demands and recovery.

4.2.6: ProblemsCOPEDU Ltd encounters in running its business

· Insufficiency funds to meet clients demands or needs and lack of enough resources

4.2.7: How to overcome these problems

· Seeking advice from policy makers especially local authorities,BNR, all on individual loan usage

· Developing business plans strategically and systematically to evaluate and monitor operations.

4.3:PART III:RESPONSES FROM COPEDU LtdBENEFICIARIES

Responses	Number of respondents	Percentage
Relative	7	35
A friend	10	50
Advert	3	15
Total	20	100

The table 14 shows that the majority, 50% ofCOPEDU Ltd beneficiaries answered that they come to know the existence ofCOPEDU Ltdfrom friends, because of a good business environment and negotiable simple loans. And 35 of respondents said that they come to know its existence from relatives while 15% of respondents said that they come to know the existence COPEDU Ltdfrom advert.

COPEDU Ltdis one of MFIs working with the productive poor, which calls for more clients for credits in groups for business. A person is a guarantee of another, which attracted more customers to joinCOPEDU Ltd.

Responses	Number of respondents	Percentage
1 week	-	-
2 weeks	14	70
1 month	4	20
2 month	2	10
Total	20	100

The result presented in table 15 show that the majority of respondents with 70% answered that it took them two weeks to get a credit fromCOPEDU Ltd, reason being a good service delivery where credits are given at subsidized interest, a person is a guarantee of another hence quick services, while 20% of respondents said that it took one month to get a credit.

Generally the credit was usefully in the following ways: it generated customers' income widened their commercial business.

Responses	Number of respondents	Percentage (%)
Yes	5	25
No	15	75
Total	20	100

Table 16 shows that 75% of respondents answered that the credit was not difficult to repay since inCOPEDU Ltd repayment is not punishable and immediate. It is negotiable. No difficulties in repayment, One month repayment is good to clients. Yet in some institutions credit is repaid after one week. The revenue realized helps them to repay. 25% of respondents said that it was difficult to repay the credit because it was hard to attain ready revenue.

Responses	Number of respondents	Percentage (%)
Building	1	5
Land	2	10
Garden	-	-
Any other	17	85
Total	20	100

Table 17 shows that the majority of respondents with 85% answered that no collateral is offered as Land, Building or garden, this is a case for individual loans. In solidarity groups, they do not give security, it is a mutual guarantee. A personal is a guarantee for another; all members inCOPEDU Ltd guarantee each other and bear the responsibility of timely loan repayment. In this case security is the group, but security clients give is TVs materials, sitting rooms and many others.

Table 18: Response on whether clients receive funds at subsidized interest rates

Responses	Number of respondents	Percentage (%)
Yes	16	80
No	4	20
Total	20	100

From the above table shows that the majority of respondents 80% ofCOPEDU Ltdbeneficiaries said that they get credit at subsidized interest rates, probably this helps to increase their business while 20% of respondents are not contented with interest charged on disbursed credit. In general the debit interest rate for most of MFIs is 1.5% per month which is relatively low.

4.3.1: What necessitated them to be beneficiaries ofCOPEDU LTD?

Most of the clients of the company (99%) answered that they were interested in joiningCOPEDU Ltd due to:

Responses	Number of respondents	Percentage (%)
Construction	2	10
Health	2	10
Small trade business	16	80
Total	20	100

Table 19 shows that 80% of respondents said that clients invest the loan into small trade business for instance to increase their market levels like markets for potatoes, restaurant, boutique, timber construction and 20% invested in health while 20% of respondents answered that they invest their loan in construction.

4.3.2 Whether the clients have recommended other people to join COPEDU Ltd

Because of a good credit environment 87% of client recommended other interested person to join institution and this is evidenced that by trusteeship among the clients and harmonization that unites and increases their business.

4.3.3COPEDU Ltdhas contributed to customers' welfare

Most of the clients, 87% said thatCOPEDU Ltdcontributes much to their welfare as individuals.

· Sustained life for instance clients are not able to have health care\, get food shelter

· Clients renting houses have ended up owning them due to disposable income and renovation of such houses.

· Company enables some clients to buy land; cows improve water supply sources and get electricity.In general clients'incomes have been increased to let them meet their daily and future demand.

CHAPTER FIVE:SUMMARY, CONCLUSION AND RECOMMENDATIONS.

5.0: INTRODUCTION

This chapter presents the summary of the major findings of the study, conclusion, and recommendations. The research study was conducted with an overall objective of evaluating the impact of Microfinance institutions credit services in poverty alleviation in the rural area.

5.1: Summary of the findings

The study findings were in line with the study objectives and research questions. The method of data collection was primary data. The data was collected using questionnaire distribution and interviews and data was analyzed using tables. The main research question was to find out whether Microfinance institutions are contributing to the poverty alleviation.

To have the information collected and works done, a study was conducted from COPEDU Ltd especially from managers and beneficiaries. The research was entrenched by the general objective, which was to assess whether MFIs contributing to poverty alleviation in rural areas of Rwanda.The research revealed out that MFIs increasing income of the productive poor through having saving sustainable business, sensitizing clients on culture of savings, even little amount, offering simple loans to the poor people who have not been able tomaintain needs of life andSome of the clients have constructed their own houses out of simple credits; others are able to feed themselves and their families, able to pay school fees for their children.

In order to attain this objective, research question widely delivered toCOPEDU Ltdwere answered. The questionnaires and interview were delivered to a selected sample of 10 managers and officers employees and 20 beneficiaries.

ToCOPEDU Ltd, the findings will help to modify, design rules on delay for repayment of the loan to make clients adopt the culture of valuing loans. To microfinance institutions, the study findings will help clarity of proper elaboration of business plans and proper management of the projects to regularize repayment of granted loans, streamline business operations, strategic plans on new product line for markets. Other endeavors can borrow ideas from the research study for better improvement in microfinance industry in the country for instance the government.

The literature review shows poverty alleviation by MFIs the importance of MFIs in developing countries whereby they offer possibility of managing scare households and enterprise resources more efficiently as majority Rwandans have limited or no access to financial services. Loans are granted with usual collateral demanded thus good business environment to the productive poor.

More to not, the research findings are the benefits, management and technical knowledge attained by the clients as the result of joiningCOPEDU Ltd more of them said that they have gained much knowledge on loan management.

What can be observed from the research findings is that, increased income to the target group(rural areas) results in improved socio-economic well being of the rural people.

Therefore, if research findings also show that, microfinance services have created different positive changes in the lives of the clients ofCOPEDU Ltd, a proof is where 87% of the selected sample said that, `they have increased their business, 13% said to have managed to pay medical charges for their families.

Customers ofCOPEDU Ltd are happy due to good repayment condition. There are no rules or laws for repayment; the company does not penalize customers for the day of repayment. Therefore repayment of the credit is negotiable with credit office.

5.2: Conclusion

COPEDU Ltd plays a significant role in trying to alleviate poverty in rural areas by providing small loans to its clients through credit associations of which the results are highly positive. Data was collected and interpreted to enable researcher draw conclusion.

MFIs contribute to the socio-economic activity of the beneficiaries by providing small and affordable loans, insurance and repayment services. In addition to this, they provide social inter mediation services such as management capabilities and training of financial literacy.

To get the impact of Microfinance institutions, COPEDU Ltd was selected for the study with a sample of 10 respondents(managers and official employees) and 20 respondents on beneficiaries. This study was helpful since the researcher came to know that MFIs are greatly contributing to poverty alleviation and came to know the problems managers encounter in running their business. Microfinance has recently become the favorite intervention for development institutions, due to its unique potential for poverty alleviation and financial sustainability. However, contrary to what some many claims, MF is not a solution for poverty alleviation.

In fact, a poorly designed MF activity can make things worse by disrupting informal markets that have reliably provided financial services to poor households over the past couple of centuries, all but at high cost.

There are many situations in which Microfinance is neither the most important nor the most feasible activity for a Donor or other agency to support. Infrastructures, health, education and other social services are critical to balanced economic development. And each in this own way contributes to a better environment for Microfinance activities in future.

To the government and central Bank, among serious critics is that it is more controlling and supporting. Care should be taken to ensure that the provision of microfinance is truly demand driven, rather than simply a means to satisfy donor agendas.

According to the World Bank (2005; 7) the role of different players is paramount in struggling against poverty. Since poverty is caused by multiplicity of factors: no single solution to it can suffice, rather the government, NGOs and financial institutions should be ready to support such good steps.

5.3: RECOMMENDATIONS

COPEDU Ltd was established in September 1997so as to solve the increasing need of financial services for socio-economic empowerment of Rwandans who were trying to get out their living conditions.

Today,COPEDU Ltdworks with both men and women, with more emphasis on women 64%. The main targeted people being the rural areas based who were trying to find means of surviving and managing their socio-economic activities.

Therefore, for the MFIs to be successful in achieving the objectives for which it was set up for, the following recommendations should be considered:

5.3.1: Recommendations toCOPEDU Ltd

COPEDU Ltd should organize a credit training program at least three times a month. Credit officers about the background ofCOPEDU Ltd and its services should hold consecutive meetings. This is to properly service ofCOPEDU Ltd activities into better line for customers.

The main activities inCOPEDU Ltd is to provide loan/credit, there is seriously a need for proper loanmanagement and an organized repayment, business up dates, strengthening ofCOPEDU Ltd solidarity and responsibility and encouraging them for internal visitation. This should be done to build skills and capacity ofCOPEDU Ltd members to ensure success of their business, management, quality repayment of proper circulation of loans to other targeted people of Rwanda.

The study revealed that most of the employees inCOPEDU Ltd have no skills potential. They have unqualified and inexperienced skills, there is very important in making their business a success. Thus training should be provided so that their activities and the impact they have on poverty reduction can be enhanced.COPEDU Ltd should sanctions provided in case of delay for repayment of credit, not following designed ruled and put in place mechanisms adapted to circumstances and level of organization of COPEDU Ltd through delegating the customers.

5.3.2:Recommendation to the Government

The government should provide good regulation environment to encourage commercial banks and intermediaries banks lend funds to MFIs. The government should encourage the development of sustainable MFIs that are managed in professional manner and capable of rendering financial services relevant to needs of the low and medium incomepeople.

The government's primary development goal should be to achieve sustainable reduction in poverty by increasing total resources available to the population as a whole and increasing the share of those resources going to its poorest segment. It should also create enabling conditions for the development of micro finance sector whilst ensuring that the stability of financial system is maintained and that consumers are protected.

Following adoption of nation policy on MF, government should adopt a law on MF and another law on savings and credit cooperatives; this is to strengthen the supervision and coordination of the operations connected to this sector. The government should organize entrepreneur development programs so as to equip skills to organize the business effectively by small business people in order to have entrepreneurial promotion and development.

Government should mobilize resources, to banklise people and to capitalize or monetize the rural areas sector so as ensure equitable distribution of financial institution and resources. The government should inject funds into microfinance institutions so that more people access those funds cheaply.

The government will not be a provider of financial services but should play the role of organizing the microfinance sector to improve operations.

5.3.3: Recommendation to microfinance institutions.

Profitable microfinance institutions should be adequately capitalized whose management should be healthy and prudent so as to protect the savings of depositors. Microfinance institutions should mobilize funds from demotic sources where NGOs will come as last resort so that overall goal of the reduction of poverty in rural areas of Rwanda can be best achieved.

They should develop tools that are necessaryfor the functioning of management capacity of their staff, specific administrators, employees and beneficiaries. The legal and coordination framework should inspire this. This enables any microfinance institution to evaluate its performance. Microfinance institutions should respect their policies by providing sufficient financial services to the targeted population and building their capacity with willingness in their sector.

Therefore, all microfinance institutions should know duration of loans; details of repayment received and deposits taken; provisions made for any delinquent loans, results of any micro project funded with loan and also number and gender of their clients. Microfinance institutions are required to submit regular reports of these data to BNR in accordance with regulation.

5.4: AREAS FOR FURTHER RESEARCH

After carrying out the research and learning some problems in the field on the project entitled «The impact of microfinance institutions credit services in poverty alleviation in rural areas of Rwanda» a research is recommended on the following areas:

· Accountability and performance as tools for proper functioning of microfinance institutions

· Factors that can lead to poverty reduction since microfinance institution is one of them,

· Commercialization of micro finance services and products offered by microfinance institutions.

REFERENCES

1.Clack E.Cochman(1993),Poverty strives, 3^rd Ed W.M.C. Brown publishers, New York

2.Gilbert A. Churchill, Jr. (1992) Basic marketing research 2^nd Ed Dryden press, New York, USA.

3. Kenneth D. Bailey, (1978) Methods of social research, 4th Ed Longman publishers, Third Avenue, New York.

4. Marguerite (2002) Micro Finance Revolution : Sustainable microfinance for the poor , Washington DC, U.S.A

6. National Bank of Rwanda (2003) Instructions no 06/2002 of NBR on Micro Finance activities, Kigali.

7. Richard M Grinnell Jr (1998), Essential Quantitative methods; A guide for Business, New York

8. Sharif I(1997) « Poverty and Financial in Bangladesh. A new Policy Agenda» in who needs credit ? Poverty and Finance in Bangladesh(Editions ), G.D.Wood and I. Sharif University Press Ltd, Dakar , 1997 and Zed books UK.

9. UNDP(1997) Micro Finance and enterprise development in Rwanda «UNDP October in 1997, Kigali Rwanda.

10. Uwanyirijuru J.B (2002) Inventaire des Intervenants en Micro finance au Rwanda, Kigali

1..Zihiga A(2001), The Role of Micro-Finance in Poverty Alleviation in Rwanda, Kigali , Rwanda.

2.Yunus Muhammad (1996) Credit for self-employment. A fundamental Human Right Grameen Bank, Dakar.

1. MINECOFIN, 2013Micro Finance practice accessed on http// www.Micro Finance gateway.Org

This questionnaire is to be filled by the staff members of COPEDU Ltd. Its purpose is to facilitate research work-study on the role played by COPEDU Ltd in poverty alleviation in rural areas.

Kindly, answer the questions that follow and information provided will be treated with the highest degree of confidentiality. Request by SINDAHERA Olivier

(Optional)....................................................................................................

e) Others, Specify please .....................................................................................

c) If no, give reasons...........................................................................

c) If yes, how long? .............................................................................................

c) If yes, which................................................................................

10. What fundamental conditions does COPEDU Ltd give its clients so as to be granted the loan?

Others, (Specify) ...............................................................

If Yes, (Specify) for how long..................................................................

f) If yes, for how long?...................................................................................................

.........................................................................................................

14: How is capacity building programs undertaking byCOPEDU Ltd to alleviate poverty in rural areas?

Impact of microfinance institutions in poverty alleviation in rural area in Rwanda case study COPEDU Ltd Rwamagana branch

DECLARATION