Assessing the Role of Microfinance in Poverty Reduction in Uganda: Achievements, Challenges and Prospects

Abstract

Microfinance services have emerged as a popular strategy for poverty alleviation in Uganda, aligning with the Sustainable Development Goals set by the United Nations. This paper critically analyzes the role of microfinance in addressing poverty in Uganda, exploring its achievements, challenges, prospects, and failures. While microfinance has witnessed significant growth since the 1980s, reaching over 3.5 million clients, concerns persist regarding its inclusivity and effectiveness in reaching the poorest individuals lacking collateral. This study delves into Uganda's microfinance landscape, assessing its impact on poverty reduction and economic development. Despite its successes in fostering entrepreneurship, employment, and savings culture, challenges such as over-indebtedness and commercialization pose significant hurdles. Drawing comparisons with microfinance experiences in other countries, the paper offers policy recommendations aimed at enhancing the sector's inclusivity, sustainability, and effectiveness in driving poverty reduction efforts. Looking ahead, microfinance remains a pivotal player in Uganda's development agenda, with potential for further growth and impact, contingent upon addressing key policy and implementation challenges.