Balanced scorecard findings Gulu reveal that microfinance institutions are leveraging BSC principles, yet struggle with learning and innovation metrics. This research uncovers critical insights into performance measurement, highlighting both effective strategies and significant weaknesses that impact service delivery in Gulu District.
1.2 – Area of Study
This study was carried out in Gulu district that is situated in Northern Uganda, and is lying about 332 Kilometres from the national capital city of Kampala. The district covers an area of 11,732 sq km, comprised of open waters and swamps (180 sq.km), arable land (10,301 sq.km), national parks and Games Reserves (982 sq.km) and forest coverage (371 sq .km).
Gulu is said to be at the centre of the northern region partly because of the several districts surrounding it. As depicted in Figure 24, Gulu district is composed of Aswa and Omoro counties and Gulu Municipality. The surrounding districts of Gulu include; Amuru (comprising of Kilak and Nwoya counties, which used to be part of Gulu), Pader, Kitgum, and Oyam districts.
Whereas the population of Uganda as of June 2007 was 28.2 million persons, up from 24.7 million in 2002, with a growth rate of 3.3 percent and sex ratio of 95 males per 100 females. The projected population of Gulu as of June 2007 was 343,100 people, compared to 298,527 people in 2002 of which 60 percent lived in rural areas. The population density as of 2002 was 86 persons/sq km, compared to 99 persons/sq km in 2007, while the average household size was still 5.1 persons with sex ratio of 97 males per 100 females. The possible reason here is that more males than females have died during the conflict, and other biological sex survival intricacies (UCC, 2003).
The type of climate experienced in Gulu consists of dry and wet seasons. The average total rainfall received is 1,500 mm per annum with the monthly average rainfall varying between 1,400 mm in January and 230 mm in August. Normally, the wet season extends from April to November with the highest peaks during May, August and October, while the dry season begins in November and extends up to March. The average maximum temperature is 50 degrees centigrade and the minimum being 18 degrees centigrade. Relative humidity is high during the wet season and low in the dry season (UCC, 2003).
The main source of water in Gulu is spring wells and boreholes though there is piped water in the urban areas. Wood fuel is the main energy source, others being solar energy and hydropower supplied by the national grid. Gulu can be accessed by road, air, and water. The national railway line also extends to the district, though it is not in operation now.
The district has a 415 km feeder road network and a 600 km community road network. Infrastructure development in the district has, however, been affected by the war which has raged since 1986. There are 196 government-aided schools but some of them are not operational or have had their infrastructure destroyed by the war.
Electricity access is limited to a radius of about 15kms from Gulu town. Solar is widely used in institutions like schools, churches, hospitals, and radio stations. The district also accesses the mobile telephone services such as, Mobile Telephone Network (MTN), Uganda Telecom, Cellular Telephone (CELTEL), (UCC, 2003), and Warid Telecom, which started its operations in the district in July 2008.
1.3 – Statement of the Problem
Since 1986, Northern Uganda has experienced insurgency and economic stagnation because of the rebel activities led by Lakwena’s Holy Spirit Movement and Joseph Kony’s Lord’s Resistance Army (LRA). The war has taken a tremendous toll on the population and the economy of the region to the extent that at the peak of the insurgency, an estimated 1.6 million people were internally displaced and confined to Internally Displaced Peoples (IDP) Camps.
Because of the insurgency, the North remained the poorest region in Uganda with some of the worst Human Development Indicators. Results of the 2005/6 National Household Survey showed that, despite a small reduction in poverty, the North had the largest population of people living in poverty, estimated at 61%, almost twice the national poverty level of 31%.
The gap between poverty levels in the North and the national average widened from 17% in 1992 to 30% in 2005/6. Evidence from the Northern Uganda Survey (UBOS 2005), and preliminary findings from Ssewanyana, et al, 2007, indicated that access and utilisation of social services were lower in the North than in the rest of the country and consequently the level of human capital development remained lower.
The North has some of the lowest non-income measures of well-being and human development indicators including demographic indicators, underemployment, literacy, and access to education, health services and clean and safe drinking water e.g. at 31%, the region has the highest incidence of female-headed households, 4.6% population growth compared to the national average of 3.2%.
MFIs in Gulu district, just like in other parts of the country, face many challenges due to lack of resources and the ever-changing environment in which they operate. Many of such organizations may have poor financial reporting systems, which might be attributed to poor data recording because of unskilled staff to handle the financial system and poor internal processes and controls.
Customers may be dissatisfied with the kind of services offered to them and the customers may have tendencies to move to alternative MFIs where better services are offered. There might also be poor internal communication, which may result into lack of cooperation, collaboration, and efficiency. Unclear policies and procedures regarding staff recruitment, and development or training.
The MFIs may also lack management information systems (MIS) in place resulting into lack of information sharing and poor reporting.
With the dynamic technological development, many employees become unskilled to cope with the changes, due to lack of regular training. Lack of incentives or motivation may also result into high turnovers and ineffectiveness in the organisations. Finally, the MFIs may not have supportive policies or legal framework, to protect client depositors.
1.4 – Objectives of the study
The main objective of this study was to analyze the framework within which MFIs delivered their services and to provide an assessment of their operations and financial management using the BSC. The MFIs were examined because of their current importance to a special group of consumers, primarily the poor and disenfranchised in the developing world, and of their future promise as an economic development solution.
Since the objectives of these institutions are unique, the manner of their assessment also differed from that used to assess the performance of traditional financial intermediaries. In particular, assessment of MFIs must recognize their dual (bank and development instrument) status. Their efficiencies must be analyzed in terms of their economic (or financial) dimension as well as their social dimension.
The first dimension may be examined with traditional measures, while examination of the second requires measures that reflect the MFI’s social objectives.
In order to accommodate the special nature of MFIs, this study made use of the BSC approach based on the following specific objectives, which are related to the main objective.
- To assess the extent of the use of BSC in each of the selected MFIs
- To evaluate the level of performance in each of the selected MFIs
- To assess the level of service delivery in each of the selected MFIs
- To investigate the relations between performance levels and service delivery levels
1.5 – Research Questions
Based on the research objectives, the main question is, can the balanced scorecard be used as a tool for evaluating performance of the MFIs? In relation to this main question, the followings are the specific questions.
- To what extent do the selected MFIs use BSC in the management of their MFIs?
- What are the levels of performance in each of the selected MFIs?
- What are the levels of service delivery in each of the selected MFIs?
- How are the performance levels of the MFIs related to the delivery of services?
1.6 – The Scope of the Study
The study covered all aspects of performance of the MFIs, in relation to the BSC. The study was focused on the use of the BSC as a measurement and management tool, the performance and service delivery levels of each of the selected MFIs and the linkage between the performance levels and service delivery levels for each of the selected MFI. The research study, which was done within a period of nine months ranging from March to November 2007, covered eight randomly selected MFIs in Gulu District. An elaborate literature review on microfinance, strategic management, performance measurement and the BSC was done.
1.7 – Significance of the study
The study is significant in the viewpoint of cross-functional research. It provides some important information to management about performance measurement and management based on the BSC approach. This area of study also calls for skilled and highly motivated employees for efficient internal business processes, resulting into effective customer satisfaction, and loyalty, outreach, and consequently, appropriate financial outcomes.
The study is also significant, since it is an obligation to the University that the researcher submits the report to the Faculty of Business and Development Studies as a partial fulfilment of the requirements for the award of a degree of Master of Business Administration. The findings might be useful to several categories of people and organisations, including the MFIs in particular, to appreciate the importance of improving their performance. The study explores and recommends potential areas that MFIs need to put in more efforts when delivering their services.
The study shall benefit policy makers, small and medium sized enterprises (SMEs) and the community at large. The policy makers shall benefit since, the findings shall provide informed suggestions on how policy can be improved. With improved and easy to implement policies, more SMEs and the community shall be able to access and benefit from the services of MFIs.
The researchers, academicians and the scholars shall also benefit from the study in terms of additional knowledge on the concept of the balanced Scorecard as a performance measurement, and a strategic management. The study shall also be an academic resource to the University Library. Scholars are likely to use this study as a valuable reference, and to be inspired to conduct similar or related studies in other districts of Uganda and even other countries in the world.
The challenges, lessons learnt and experience acquired, shall improve the researcher’s skills, in the development and application of research methods and techniques.
Frequently Asked Questions
What is the Balanced Scorecard framework used for in Gulu District?
The Balanced Scorecard framework is used for evaluating the performance of microfinance institutions in Gulu District, blending financial and non-financial metrics for effective performance measurement.
How many respondents were surveyed in the Gulu District microfinance study?
The study surveyed 74 respondents from 8 microfinance institutions (MFIs) in Gulu District.
What weaknesses were identified in the microfinance institutions’ performance in Gulu?
Weaknesses were identified in the learning, growth, and innovation perspectives of the microfinance institutions, which affected overall service delivery and performance levels.