Micro-finance Services and Poverty Reduction in Uganda

Poverty level in Uganda has steadily declined in the last three decades from 56 percent in 1992/3 to 19.7 percent in 2013/14. Despite this decline, the 6.7 million people are living in absolute poverty out of 34.1 million people and based on the Human Development Index, Uganda is ranked 157th out of 182 countries. Over the years, the Government of Uganda (GoU) has implemented various programs geared towards promoting access to Microfinance for poverty reduction but there is limited empirical evidence of their impact. Emphasis was on (i) how accessibility to MFIs affects the poverty status of households and (ii) the determinants of accessing MFIs services. The Heckman's two-Staged method was applied to control for sample selection bias. Controlling for other factors, access to MFI services increased the income levels of the household by 15.38% whereas, controlling for sample bias selection, the income level of the household increased by a small percentage of 5.9%, and engaging in farming activities and also staying in the East where the only significant determinants of access to Micro-credit in Uganda.