CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Microfinance institutions can be traced back as long as the middle 1800s when the theorist Lysander Spooner was writing over the benefits from small credits to entrepreneurs and farmers as a way of getting the people out of poverty. The today use of microfinancing has its roots in the 1970s.

In 1974 an economics lecturer at the University of Chittagong, Bangladesh, lent $27 to a group of impoverished villagers. Mohammed Yunus founded the Grameen bank whose research pioneered the concept of providing micro-banking services and non-collateralized loans or the poor in order to alleviate poverty in 1983 to make very small loans – perhaps $15 a time – to the poor and uncreditworthy. Since then it has loaned about $3 billion to more than six million of the very poorest in Bangladesh and across the Asian sub-continent.

The bank’s impact research suggests that each year, only 5% of their clients (Grameen bank) are lifted out of poverty. The Grameen bank is now experimenting with a holistic approach where basic medical care is available at the same place the customer would go to repay an installment of the loan and offering adult education.

It funds 20 000 students loans a year and provides 50 000 scholarships for schooling. It is also trying to find ways of helping creditors survive a disaster, whether it is a personal accident or a major flood. The five largest and most influential MFIs in the world according to Investopedia as of 2016 are;

Firstly, 51give bank found in 2007 in Beijing, provides microfinance solution services to other MFIs, they offers an e-commerce platform that offers both online and mobile technology designed to connect individuals, companies, organizations, and institutions with local MFIs, thus facilitating donations, investments, and delivery of micro-financing services.

Also, bank Raykat Indonesia is the oldest Indonesian bank, founded in 1896 in Jakarta, and has established itself as the country’s largest financial institution, while operating primarily as small scale and microfinance lender, with more than 30 million retail banking clients conducting business with the bank through thousands of branches and rural service posts. The bank is 70% owned.

In addition, Brac was founded in 1972 in Bangladesh and is one of the oldest existing MFIs.  Brac provides a broad range of services in the areas of human rights, education, health, and economic development, including grants and small businesses loans, housing assistance, and micro-savings services. Brac operates in a dozen developing countries, stretching from Haiti to the Philippines. As of 2015, its gross loan portfolio was more than $1.4 million.

Furthermore, Grameen bank founded in 1983 in Bangladesh, holds the distinction of being a Nobel peace prize-winning MFI. As of 2015, Grameen bank has more than 8 million borrowers and a loan portfolio in excess of $18 billion. In addition to providing microcredit and other banking services, the bank also launched an award-winning low-cost housing program in 1998.

Lastly, Kiva, (2005) micro funds with headquarter in San Francisco, Kiva microfunds is a non-profit MFI that operates in the United States and more than 80 other countries worldwide. Its operational method for providing microfinance lending is through establishing a crowd funding, or peer-to-peer (P2P) lending, platform that allows individuals to lend directly to borrowers in other countries who lack access to traditional financing sources.

Kiva provides interest-free financing for small businesses, education, and health services such as clean water. As of 2016, kiva has extended more than $850 million in microloans and has a network of approximately 1.5 million lenders and approximately 2 million borrowers. The organization’s website states that it funds an average of $2.5 million in loans weekly.

Another pioneer in this sector is Akhtar Hameed Khan. The main reason why microfinance is dated to the 1970s is that the programs could show that people can be relied on to repay their loans and that it’s possible to provide financial services to poor people through market-based enterprises without subsidy.

The first microfinance institution appeared in Africa when CARE which is an NGO launched its first microfinance program in Niger in 1991 and clients-predominantly women-defined their needs and put parameters around the process. Today microfinance institutions are spread all over the continent. However, the continent is still underserved by financial services.

The cost of bringing MFIs services in Africa is very high more than every part of the world because Africa has many vast and sparsely populated rural areas, a higher rate of illiteracy, and a widespread lack of identity documents; Bateman & Snell, (1996). Among the African countries where MFIs were spread include Cameroon.

The overall success of an institution in achieving its strategic objectives relies heavily on the performance level of employees. Employee performance is a function of ability and motivation, where ability is comprised of the skills, training, and resources required for performing a task, and motivation is described as an inner force that drives an individual to act towards something. (Flippo E. 2001). He also adds that employee performance in institutions results in a more motivated workforce that has the drive for higher productivity, quality, quantity, commitment, and drive.

Moreover, in the case of using human beings to provide services, it is not enough to merely rely on the number of people engaged, their qualification and experience, or their ability but motivating them appropriately is also of paramount importance. Thus, the personnel engaged must be motivated in order to get the best output from them.

As well, a highly motivated person will work hard towards the achievement of an organizational goals, given the ability and adequate understanding of the job. Therefore, the challenge for the majority of today’s management is to administer motivational programs which will encourage employees to improve their work performance and productivity. (Bateman & Snell 1996).

1.2 Problem Statement

The statement of the problem is that the performance of Microfinance Institutions has come under a stream of criticisms. The staff has been accused of a high level of inefficiency and commitment in the discharge of their project implementation by the beneficiaries and the donors. Thus, in relation to these, the researcher tried to communicate with one of the project coordinators regarding the existing staff motivation related issues, thus in his response, he revealed that;

“Currently, most workers in MFI’S know how to perform in the approved manner and the resources are available, but for one reason or another, prefer not to do so, hence, the problem is related with lack of employee motivation.

Since MFI’S’s project work is emergency work, many jobs have troubles that are inherent with the condition, i.e meeting deadlines, and massive workload. However, there is no motivational practice applied so far in the organization, as a result, employees could not produce the expected output as a result there is high staff turnover in the organization.

However, the leader is not trying to find out what the exact problems are by looking beyond the symptoms and finding a solution but only they are focusing on the problem and decide to evaluate the employee accordingly and this is demotivating the employees.”

In relation to these, the performance of organizations and employee motivation has been the focus of intensive research efforts in recent times. How well an organization motivates its workers (Intrinsic or Extrinsic) in order to achieve its mission and vision is of paramount concern.

Despite these, no research work has targeted to investigate the roles of extrinsic and intrinsic motivation on employee’s performance in Microfinance Institutions. To this effect, this study attempts to assess the roles of motivation on employee performance of Microfinance Institutions and assess the underline ground for staff discouragement and low performance.

In order to achieve the stated objectives below, this research paper will seek to answer the following questions: –

To what extent does motivation affect the performance of Mutengene Savings and Loans Cooperative Society Ltd?

1.3 Research Objectives

1.3.1 Main Objective

The general objective of the study is to explore the roles of motivation on employee performance in Mutengene Savings and Loans Cooperative Society.

1.3.2 Specific Objectives

1. To examine the role of training and development on employees performance in Mutengene Savings and Loans Cooperative Society;
2. To assess the extent to which motivations are implemented by Mutengene Savings and Loans Cooperative Society.

1.4 Research Hypothesis

Ho: Remuneration and promotion do not have a significant effect on employee performance in Mutengene Savings and Loans Cooperative Society.

H1: Remuneration and promotion have a significant effect on employee performance in Mutengene Savings and Loans Cooperative Society.