1.1 Background
Informal sector all over the world plays a significant role in national development due to the massive employment it provides to the citizens of the country where it exists regardless of their education and experience. Informal sector simply refers to those economic activities that are not formally registered by the relevant authorities and sometimes are neither taxed nor monitored (Khavul, Bruton, and Wood, 2009). These informal business activities can include but not limited to; food vending, selling of second hand clothes and other goods, electrical equipment repairs, mechanical works and metal fabrication, grocery and carpentry. Despite the significance attached to this informal business sector, getting access to financial assistance from formal financial institutions sometimes is not easy. This is attributed to factors like lack of collateral security and sometimes lack of permanent address that deprive lenders’ interest in them due to anticipated consequences that would arise thereafter (Obamuyi, 2009). For instance, failure to recover their loans back. Hence, a small number of informal business entrepreneurs rely on formal financial institutions (banks) for financial support to enhance their business performance and expansion.
Uganda’s financial system is characterized by the co-existence of formal and informal financial institutions. The formal financial institutions mainly exist in urban areas and offer a narrow range of financial services. They concentrate on providing working capital mainly to medium and large scale enterprises. The formal financial institutions are inflexible in their operations in respect to the needs of small scale enterprises and to the poor in rural areas who may not have enough collateral or well written feasibility studies to solicit for loans (Porter, 1998). Provision of microfinance services to the informal businesses is expected to contribute to the improvement of the businesses in terms of increased working capital, stock accumulations and increase in levels of income (Dhakal, 2016). There are several microfinance institutions all over the country that are issuing loans and deposit facilities to low income segments of communities and small scale businesses. These include Pride Microfinance, Finca, Brac, Faulu (now Opportunity Uganda) among others.
In Uganda, the mushroomed numbers of Microfinance institutions have become an important tool to promote small business development in the informal sector. This is through provision of working capital, development capital as well as providing them with business development services for instance financial management training services and enabling them get access to lucrative markets. A number of Microfinance institutions have picked an interest to extend the delivery of the above mentioned services to small scale businesses who have limited access to formal financial institutions. Microfinancing is an instrument that is now seen as one of the most promising tools to tackle poverty, create jobs and improve the wellbeing of the poor in the Developing World and as a pathway to business performance especially among the informal sector, (Engström, 2016). According to Maddah, (2014), access to credit via microfinance by informal business owners generates income and livelihood options for disadvantaged segments of the population, giving them more chance to financial inclusion.
Finance is one of the important determinants of business success. However, its access as mentioned above remains a constant challenge among the small businesses across the informal sector. Hence, their poor performance could partially be attributed to this factor. Microfinance has however become an important source for informal businesses development due to their role in extending credit services to small businesses in the informal sector and filling the gap left by commercial banks. It has to be noted however that, although the role of financial services provided by MFIs is seen as an important determinant for successful entrepreneurial activity, an important source for businesses formation, and livelihoods enhancement among the informal business owners, studies for instance Lusardi, (2008), have shown that finance does not in itself create economic opportunities and better performance. Financial services alone are not enough to continuously enhancing the sustainability and performance of the businesses. Thus, it is necessary to integrate nonfinancial services and financial services. It is entrepreneurial people who see ways in which they can generate income from situations, have good financial literacy and managerial skills or other push factors, as well as being aware of the availability of various business development services so as to enhance the business performance.
1.2 Problem Statement
Informal businesses have tremendous opportunities and possibilities of contributing massively to Uganda’s GDP. This is manifested in the employment opportunities this sector offers to majority Ugandans especially youths who fail to get absorbed into formal employment. Much as the government through the Ministry of Finance, Planning and Economic Development (MoFPED) and Bank of Uganda (BoU) have taken initiatives to provide financial incentives to many youths to startup businesses, anecdotal information reveals that many informal businesses fail to survive to celebrate at least their first birthday. This is partly explained by lack of access to financial services by the entrepreneurs as well as lack of financial literacy and business management skills and other business development services (Dahmen, and Rodríguez, 2014). This is because despite the fact that credit is seen as a determinant for successful business, it cannot enhance business performance in absence of good financial literacy, managerial skills and other business development services (Lusardi, 2008).
Microfinance industry is seen as a savior to many informal businesses in Uganda given its less stringent procedures in loan processing and its target to the less privileged groups in the community. However; much as Uganda has seen massive increase in the number of MFIs, there is limited evidence on the role these MFIs play in the performance of informal businesses in Uganda. Similarly, given the registered increase in the MFIs, there is observed trends in the poor performance of the informal businesses in Uganda. The current study therefore intends to explore the Business Development services MFIs provide to informal businesses in Uganda. Secondly, the study intends to explore how these services help to improve the performance of informal businesses in Uganda.
1.3 Objectives of the study
The study aims at establishing how microfinance institutions enhance the performance of informal businesses in Uganda. The focus for this is on the business development services that MFIs offer to these businesses. This is intended to inform policy on how these businesses which are said to employ majority of Uganda’s population can be improved with the intention of alleviating poverty and enhancing the welfare of the majority poor in Uganda.
To realize this purpose, the study specifically intends to;
1. Establish and document the business development services offered by MFIs to informal businesses in Uganda.
2. Assess the level of awareness about business development services provided by microfinance institutions by the informal businesses
3. To investigate the extent to which these business development services lead to improved performance of the informal businesses.
1.4 Research questions
The following research questions will be responded to;
1. What are the business development services provided by MFIs to informal businesses in Uganda?
2. What is the level of awareness about the business development services provided by microfinance institutions among the informal businesses?
3. To what extent do business development services offered by MFIs enhance the performance of informal businesses in Uganda?
1.5 Study scope
The geographical scope of the study will be Katwe, a suburb in Kampala district. The respondents will be drawn from informal businesses especially those benefiting from Pride microfinance. These will include food venders, metal fabricators and mechanical works among others. The management and employees of pride microfinance will also be included in the study. Pride Microfinance has been selected as an institution for research because it is one of the largest Microfinance institution in Uganda, and thus one of the most ideal MFIs for this study. Kampala district has been chosen because it is the centre of informal business activities in Uganda
1.6 Justification for the study
Despite the number of studies that have been carried out on microfinance and its role towards support of informal sectors, for instance Amos & Oluseye, (2013); Kamran, (2009); Kapwani, (2014;), many have failed to point out the extent to which these MFIs are enhancing the performance of informal business sector. A study like Wanambisi, and Bwisa, (2013) which was carried in Kitale Kenya about the effects of Microfinance Lending on Business Performance, asserted that financial lending enhances performance of informal business but this study failed to elaborate on the performance of informal businesses as a result of business development services rather than the financial assistance. Furthermore, many of the studies have been carried out in countries which could be having different business environments from Ugandan one particularly like in Katwe. This shows that there is concern in the research gap that needs further investigation.
1.7 Conceptual framework
The conceptual frame work in figure 1 below illustrates the role of MFIs in enhancing performance of informal businesses through provision of business development services to them.

Figure 1: Conceptual Frame work

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1.8 Operational Definitions
Informal business: Informal businesses are economic activities that are not formally registered by the relevant authorities and sometimes are neither taxed nor monitored (Khavul, et al, 2009). For instance; food vending, selling of second hand goods, equipment repairs, mechanical works among others.
Microfinance: Microfinance, also called microcredit, is a type of banking service that is provided to low-income individuals or groups who otherwise would have no other access to financial services (Duvendack, 2011). Microfinance often provide microloans ranging from as small as $100. They sometimes offer savings and providing financial and business education. As a way of giving impoverished people an opportunity to become self-sufficient.
Business Development Services (BDS)
BDS refer to a wide range of services used by entrepreneurs to help them operate and grow their businesses (Cascio, 2018). Research has revealed that many small businesses are constrained by factors such as levels of education, poor management, weak marketing skills, inadequate technical know-how, limited access to markets, lack of information, and unreliable infrastructure. Hence, business development services are believed to enhance success in both technical and non-technical skill development through acquisition of business knowledge and mastering the skills through training and education to use that knowledge to the best of the ability (Bruhn, et al, 2018).

2.1 Introduction
This section, presents the review of related literature from various scholars across the world on the role of MFIs in enhancing the performance among the informal businesses mainly focusing on business development services (BDS). The main themes to be looked at include; documenting the business development services offered by MFIs to informal businesses, assessing the level of awareness about BDS provided by MFIs to the informal businesses and investigating the extent to which the business development services lead to improved performance of the informal businesses.
2.2 Business development services offered by MFIs to informal businesses
Business development refers to a wide range of services used by entrepreneurs to help them operate and grow their businesses (Cascio, 2018). Research has revealed that success in any business is dependent on the acquisition of knowledge and mastering the skills by the owners to use that knowledge to the best of their ability. This is because; skill development is one of the investment brands and quality assurance for better business value.
The business development services that microfinance institutions (MFIs) offer to entrepreneurs especially in informal sector can be categorized as; non-financial services, which include; services like training in financial literacy and business management among others and the social intermediations services for instance networking among others. These business development services offered by MFIs to small businesses are as discussed below;
2.2.1 Non-financial services
The financial services provided by MFIs are very important sources for businesses formation, and livelihoods enhancement among the informal business owners. However, their access still remains an obstacle to informal business entrepreneurs. Thus, integrate non-financial services and financial services can play a crucial role in the enhancement of the performance of informal businesses. Furthermore, financial services alone are not enough to continuously enhance the sustainability and performance of the businesses since the success of any business does not only rely on the finances but on the skills to manage those finances as well. There are number of non-financial business development services that are offered by MFIs to small businesses as a way of lending them a hand for better outcome. These can be categorized as discussed below; Financial Literacy training
Financial literacy refers to the ability to understand how money works, how someone makes it, manages and invests it, and also how it is supposed to be spent. Financial illiteracy is sometimes termed as a non-negotiable skill in business. For instance, it is not a must that the owner needs to be an accountant or to have competent skills of a bookkeeper to manage a business but he/she needs to understand financial reports work and use them to make the best possible business decisions. More importantly, the owner has to be capable of building a cash-flow plan and budget to project service and retail sales goals in order to be in position to manage expenses. Finances in business can only be taken as the fuel of business. But successful businesses depend on how the owner is able to learn and master the skills to be financially responsible in order to ensure that there is enough fuel to achieve the business goals. This important part of business development program covers fundamental aspects of financial and business management.
Carlin and Robinson, (2012), define finances as the basic inputs needed to keep the business running on a continuous basis. The term finance can also be referred to cash which includes coins, currency and cheques held by the business and balances in its bank accounts. Sometimes near cash items such as marketable securities or bank time deposits are also included in cash.
Financial management is therefore concerned with the managing of cash flows into and out of the businesses, cash flows within the business and cash balances held by the business at a point of time by financing deficit or investing surplus cash. Financial management involves a series of steps intended to ensure that actual performance that conforms to expected objectives of business operation and to provide reasonable assurance of the safeguarding of assets against unauthorized use, deposition, the maintenance of proper accounting records and reliability of financial information used with the business or publication.
According to Brigham, and Houston, (2012), the key fundamentals of financial management can be represented by a cash management cycle. This can be described as: sales have to generate cash, which has to be disbursed out and the surplus cash has to be invested while deficit has to be borrowed. The financial management seeks to accomplish this cycle at a minimum cost.
Hove, and Wynne, (2010), states that, efficient management of cash is extremely important in any business because cash is the basic input of production, though it does not go directly onto the production process of management but it involves managing the monies of the business in order to maximize cash availability and interest income on any idle funds. At one end, the function starts when a customer writes a cheque to pay the business on its account receivable and ends when a supplier, an employee or the government realizes collected funds from the firm in an account payable or accrual. All activities between these two points fall within the realm of cash management
Biteete, and van Lieshout, (2013). state that, financial controls are largely an effort to assess the financial performance. Proper funds management is critical for the survival of any organization or business enterprise. Therefore, entrepreneurs involved in financial management may be motivated to expose or hide poor financial performance. Proper financial management can be enhanced through indicators of controls and these include budgets, proper books of accounts, financial documents bank reconciliation among others.
A budget is used as a financial control tool by comparing actual amount of income and expenditure with the planned amount of income and expenditure. Lewis, (2013) in his book, “Theory of economic growth”, defined a budget as a plan expressed in money terms. He went on to say that, it is prepared and approved prior to the budgeting period and it shows a comprehensive and coordinated plan expressed in incomes and expenditures terms showing operations and resources of an enterprise for some specific period in the future.
As a way of helping informal businesses to have a proper arrangement technique in controlling incomes and expenditures so as to indicate the performance they expect, MFIs have programmes that are aimed at accomplishing this, whereby informal business owners are trained on how to manage their finances well through budgeting. Mentoring on business management
According to Colvin, and Ashman, (2010), mentorship is a relationship in which a more experienced or more knowledgeable person helps to guide a less experienced or less knowledgeable person. Mentorship has been described by international labour organization as one guaranteed way to gain experience from others. According to Ratti, (2012), experience is a very expensive asset yet it’s crucial to business success. There’s only so much about a person’s experience you can gain from books. In business, some personal experiences from various entrepreneurs may be of great importance if shared, since the way one overcame some challenges may help an inexperienced entrepreneur in his or her business too. One key factor of mentorship in business is to share ideas and encourage others. For instance, enduring the consequences of failure on your own can set you back and impact your productivity and performance. However, in hard times, having a mentor can help you keep your head high. Entrepreneurs especially from informal businesses often deal with depression when they are unable to meet their goals and expectations. The impact of depression on entrepreneurs is often underreported. But entrepreneurs without mentors bear the brunt the most.
A mentor who has experienced the highs and lows of running a business is in the perfect position to give others positive and soothing words of advice when things refuse to go on right. And not only do they have the right words to share, they would also have ideas to help others navigate towards success.
In Uganda, microfinance institutions particularly pride microfinance has played a crucial role in mentoring start up entrepreneurs as one way of guiding them through the business path. This has always been administered through organizing training sessions or can liaise with other mentors from legal, financial or other professions, providing business management guidance, advice, and training to help in supporting these entrepreneurs especially from the informal sector. Sometimes, mentors are chosen by MFIs from among the informal business themselves especially those willing to give back to their communities by assisting other informal business entrepreneurs who are ready to grow their businesses. Provision of entrepreneurial and business skill training
Microfinance institutions worldwide are well renowned for their roles of equipping small businesses with hands on entrepreneurial training as a way of empowering them with necessary technical skills that can expose them to appropriate business management knowledge. These training programmes are aimed at building capacities of informal businesses operators with necessary basic skills in business management so as to have an improved revenue, improved net sales, build brand identity, to be self reliant through having sustainable businesses. Hence by having the above features, there is a possibility of improved house hold income among the business owners and hence promoting industrialization.
Orobia, et al (2013), states that, human capital which includes use of business skills has been referred to as a factor of importance for business success. The human capital concept identifies individual characteristic of the owner as an important prerequisite for entrepreneurial survival. Business knowledge and skills are acquired not only through formal training but also through exposure to work places which continues to play a major role as business people try to cope with problems and to correct deficiencies in business performance (Berge, Bjorvatn, and Tungodden, 2014)
Empirical studies such as that of Mustapha, and Selvaraju, (2015), have identified links between personal competences and attributes and acquisition of business or managerial knowledge and skills known to be crucial to entrepreneurial success. Direct and indirect access skills are an important resource in the competition for scarce resources. This in turn appears to be predictive of the efficiency and effectiveness of individual entrepreneur’s effort to acquire key production input factors of capital, appropriate technology and quality human resources (Nguyen, Newby, and Macaulay, 2015).
In Uganda, such trainings are usually conducted by MFIs’ skilled and knowledgeable trainers in partnership with the government. The trainings are targeted towards better business management, improvement in productivity and product quality of existing small businesses. In most cases, these training exercises are funded by the government of Uganda and are carried out among informal business entrepreneurs in the various districts across the country. Training on marketing and accessing for them the markets
Marketing activities describe decisions and issues relating to product, price, promotion and distribution (Nagle, and Müller, 2017). According to Andrews and Shimp, (2017), the main purpose of marketing is to understand and meet customer’s needs and this is achieved when all components of the marketing systems are coordinating efforts and working in harmony. Gure, and Karugu, (2018), state that, well-conceived and effective marketing activities will facilitate the achievement of business objectives such as market share, high sales, profits and competitive advantage.
In developing countries, research efforts of the early 1980s indicate that marketing activities were not adequately performed. However, by the late 1980s, signs of improved marketing practice were beginning to emerge (Strydom, 2017). Previous studies which focused on the marketing activities of domestic and foreign enterprises in developing countries reported differences in their practices, with foreign enterprises out competing their counter parts in most areas.
Okoroafo (1996), observed that there was an increase in marketing efforts among indigenous informal businesses in Nigeria, but still found that foreign enterprises were ahead of their domestic counter parts. Generally foreign enterprises tend to focus on customers’ service and the delivery of superior product and quality package. Their products are distinguished by brand names and they utilize business principles which have been tested and perfected in their home markets. He added that foreign executives are familiar with competitive marketing practices due to the experience and skill acquired in their home markets.
While carrying out a study on the influence of marketing strategies on performance of fast-moving consumer goods companies in Nairobi county in Kenya, Achola, and Were, (2018) found out that marketing is significantly and positively related to performance of any business whether big or small, foreign or indigenous. However, they found out that product distinction has a lot of influence on customer orientation. Hence, they found out that marketing inform of having distinct products and activities are significant determinant of performance both in informal and formal business sector.
The general trend derived from the findings is that the extent of practice of individual marketing activities is linked to its impact on business performance. For instance, in informal businesses, pricing and promoting activities do not seem to be performed extensively neither do they exhibit a significant impact on performance. On the other hand, the study revealed a high incidence of performance of product, distribution and customer oriented marketing activities and further more these elements were found to influence business performance.
According to Ocloo, Akaba, and Worwui-Brown, (2014), noted that in developing countries, the owners of informal businesses may not have a complete appreciation of certain marketing functions, possible explanation why activities such as personal selling, sales promotional techniques, offering discounts for different type of purchase and analyzing competitor’s prices do not receive much attention. He recommended that marketing difficulties might be resolved by providing training on all marketing functions of a business with focus on the customer as a central to all marketing activities. He added that there’s need to transfer marketing knowledge and skills to developing countries and where appropriate importance to adapt and modify western techniques and tools that match the need of these new and different cultures.
Basing on the above literature, microfinance institutions in the recent years have come out with the aim of lending hand to the informal sector enterprises, in developing countries including Uganda, in terms of equipping them with necessarily marketing knowledge through training. This is because, it is believed that performance of any business can only be enhanced if and only there is vast knowledge on the type of products that one offers to their clients (Donner, 2007). Provision of customer care training skills
Customer care service is a set of activities and programmes under taken by retailers to make the shopping experience more convenient and rewarding for their customers. Cook, (2010) states that, customer care service is a set of activities designed to enhance the level of customer satisfaction that is the feeling that the product has met the customers’ expectations.
According to Kumar and Reinartz, (2018), customer care service is one of the elements of the product mix of which the perceived performance of the product matches the buyer’s expectation. This means that the moment the performance of the product declines or reduces, the customer gets dissatisfied and if the perceived performance of the product increases, the customer gets satisfied or delighted and this will lead to continuous purchase of the product hence high sales volume for the business. Therefore, customer care services have to focus on embracing the basic roles of providing superior customer satisfaction. The business owners should have willingness and ability to bring the customer to the very centre of their enterprises.
The microfinance, therefore helps in training various informal businesses to create a competitive environment by emphasizing the quality and the amount of customer care services such as delivery of after sale services, goods wrapping, routine free repair, response to customer orders, home deliveries, provision of services of displaying for easy locating of items by customers in reasonable amount of time, offering credit facilities to loyal customers, demonstration of merchandise on behalf of manufactures, provision of parking area, provision of warrants for items bought among other services (Khodakarami and Chan, 2014). Tukamuhabwa et al, (2014) asserted that, knowing customer needs is the cornerstone to successful marking as businesses realize what, where, how, and when to serve customers needs and wants and even their demands. Technical assistance services
Microfinance institutions also do extent the technology and technical assistance services to the informal businesses as a way of helping them to improve the capacity of their businesses in planning and managing their operations and to develop their technical expertise. These technical services are believed to help these entrepreneurs improve the performance of their businesses, access to markets for their products and their ability to compete favorably. With this, MFIs are often involved in research and identifying new technologies, assessing their capacity for sustainable local production, marketing and services of these technologies if given to informal business entrepreneurs, hence through this, they do enhance the performance of their businesses.
Technology in the workplace permits businesses to extend rapidly and proficiently. For instance, with technology, business organizations can focus on a more extensive client base and develop more significant plans. Business technology is essential since it enhances communication in the workplace. Office specialists are not restricted to telephone calls or official mail to collaborate with each other any longer. But rather there are alternatives that now be used, for instance use of social media platform whereby one can send messages immediately without intruding on others. Business technology likewise enhances communication with customers and business accomplices since data can be gone through various channels in a split second.
According to Bukenya, Kasse, Nansubuga, (2014), Technology is not only restricted to formal businesses but rather informal businesses can use it enhance the proficiency of screening, selecting and procuring potential hopefuls. For instance, informal business can also use the Internet to get the message from their fellow entrepreneur or even getting opportunities for their businesses such as order for their products and services.
2.2.2 Social intermediations services
Microfinance institutions have also been there in the context of sustainable livelihoods among the informal business entrepreneurs in terms of social intermediation service provision. Social intermediations services are simply the brokerage functions which bring together seekers and providers of goods, information and money. According to sundquist, (2014), social intermediation can as well be defined as a process in which investments are made in the elaboration of both human resources and institutional capital with the aim of increasing the self-reliance of marginalized business groups, preparing them to engage in formal transactions independently. The need for intermediation occurs due to the imperfect nature of markets and everyday situations where the complete knowledge about providers and seekers (and about what they seek) is not available to everyone who is in business. Social intermediation therefore enhances group formation, networking, and capacity building through training on financial literacy, bookkeeping, and business management among members of a group. Social intermediation through a range of activities and capacity-building has enabled entrepreneurs especially from informal sector to become good borrowers and savers, better manage their finances by helping them to put whatever little they have to more productive use. According Turyakira, P., and Mbidde, C. I. (2015), MFIs through social intermediation services, especially in developing countries like Uganda have played a big role in promoting networking approaches between small business and other organizations which in most cases enhances a good start to development and increasing competitiveness of businesses. Using trust as the base, MFIs have been able to foster informal business groups’ cohesiveness through networking. The group members from informal sectors have been able to derive a range of benefits including but not limited to low-cost marketing, knowledge diffusion and opportunity awareness rather than business training only. This is because, while credit unavailability may be the major constraint on informal business growth and performance, other constraints come into play, for instance, products, market and managerial constraints that hinder their survival. Hence, social intermediations services are equally important for growth, performance and development of informal businesses and consequently survival. According to the International Labor Organization (ILO), informal businesses are unlikely to grow significantly and survive without additional inputs to address the additional hindrances. Informal businesses are therefore in need of non-financial services especially from MFIs as earlier mentioned in order to succeed in their businesses.
The objectives of social intermediation services provision can be pursued through connections with other individuals which can in return strengthen the relationship of working together hence increase access to more information or useful organizations. Social intermediation services are very important in a way that they connect people and when people come together and have the common goals within their societies they are capable of forming new structures that later may lead to restructuring existing policies to new policies that are more usable and accessible by these individuals. Social capital can however affect some individuals negatively; for example, people who do not have the ability to be involved in social groups may end up being excluded. Furthermore, it could be difficult creating networks as some may have restrictions, for example some people could be eliminated from joining some groups (in case of borrowing credit) before fulfilling the requirements for borrowing however the positive part is that people within the same network may support each other in different ways.
In Uganda, microfinance institutions such as pride microfinance started by targeting informal business groups especially in fishing communities, local markets among others at the local level. The reason for this was aiming at getting a reach out to the vulnerable groups. This has always been done for example through restructuring local institutions such as SACCOs, both directly (improve people’s knowledge, improve availability of resources and educate local leaders) and indirectly for example, change in policies so that the environment is more conducive for all to operate in without any tough restrictions. It has also been taking into consideration what paths to be taken in order to support informal business group as well as identifying the key indicators to well-functioning groups. Presence of government structures at local level has also been important for provision of social intermediation services by microfinance institutions.
2.3 The level of awareness about BDS provided by MFIs to the informal businesses
According to international labour organization, business development services which include; training, consulting, marketing support, business information, access to technology, advocacy, business linkages, infrastructure development and social intermediation services are believed to be very crucial in helping businesses become more profitable by assisting them in: developing and producing quality products effectively, accessing higher value markets, managing their business efficiently and generally improving and developing their business (ILO, 2005). These services can be directed at micro and small enterprises (SMEs) facing a variety of constraints due to poor levels of education, weak management, competitive markets, low quality products and/or services, lack of marketing skills, inefficient infrastructure and lack of familiarity with the local economic environment (for instance refugees, returnees) (Otieno, and Kiraka, 2015). This is because the businesses in this category often find it difficult to develop to their full potential and often risk failure.
Despite availability of these services, studies have revealed that most of the informal entrepreneurs are reluctant to embrace them. According to Nkonoki, E. (2010), awareness and adoption of such services can be attributed to three factors, these include; entrepreneur attributes, service provider’s background and environmental aspects.
On the entrepreneurs’ attribute side, factors such as ignorance about the importance of the services and attitude are some of the factors that may contribute to low level of awareness and access to these business development services. While on the service provider side, some microfinance institutions may be selective in offering their services hence leaving other informal businesses uncovered. While on the environmental side, some informal businesses may be located in areas which are not reachable by the service providers. For instance, being located in remote areas. This for instance, may affluence on the level of interest and intension to cover them.

2.4 The extent to which the business development services lead to improved performance of the informal businesses
Today, most of the microfinance programs around the world are targeting small businesses as their clients. Microfinance is thus seen as a roadmap to financial inclusion and empowerment among the small businesses mostly in informal sector. In addition to providing collateral free access to finances, business development services provided by microfinance institutions to informal businesses have been proven to be of crucial importance in enhancing the entrepreneurs’ business management skills, hence, improving their business performance.
2.4.1 Opportunities provided by business development services to informal businesses
Business development services (BDS) are very important because they assist entrepreneurs to run their business more effectively. BDS can as well act as an enhancer of access to finance and as an alternative form of collateral in circumstances where tangible collateral may be an impediment to meeting traditional security requirements (Edgcomb and Girardo, 2012; Kamukama, & Natamba, 2013).
The business development programmes, especially financial literacy training to entrepreneurs provides extensive knowledge which is always growth-orientated towards their respective businesses. These training programmes often end when the participants have got reasonable management plan for their business, new marketing skills for their products and even business connections/Linkages.

Mentorship based business development services creates a sense of hope among the informal business owners who may have had issues in the past. As entrepreneurs come together to share their business knowledge, skills and experiences it helps in giving hope especially on how one should endure hard times, most especially when things are not moving according to their expectations. It makes someone to be strong and learn how to be patient.
Training on business management skills can act as an enhancer to financial acquisition. Good financial knowledge can act as an alternative source of collateral towards acquiring financial assistance from lending institutions due to the belief on the capabilities one has and trust best.
2.4.2 Barriers to provision of business development services to informal businesses by MFIs
While various countries across the world have offered strategic direction in terms of support of small business market development from time to time, there is yet no coherent and focused delivery of such support available throughout the regions in those states. For instance, in most developing countries like Uganda, some informal business especially in rural areas do not equally benefit from services provided by the microfinance institutions. This is because most of MFIs operate in urban and semi-urban areas hence leaving out some parts from the benefiting on those programs where a range of services are offered. In general, there is a range of obstacles facing entrepreneurs needing support. Remote areas in rural areas, for example, are in most cases under resourced and serviced.
2.5 Measure of performance of informal businesses
Performance is a multi-dimensional concept which is measured in terms of sales revenue performance. However, according to Taticchi, (2010), business performance can be measured in financial or in non financial terms.
2.5.1 Sales performance.
Verbeke, Dietz, and Verwaal, E. (2011), defined sales performance as a degree to which there is a large number of clients matching the business’s expectations. It is viewed as a means of getting better results as a purpose for the business of the organization structure.
Sales performance can also be viewed as the achievements (in units and values) made by an organization in selling its products in the market. Odongo, J. (2014), acknowledged that in order to enhance sales growth for a business, management should continuously monitor customers’ changing tastes and preferences and satisfy them better than competitors. This is because, sales performance ensures that individuals understand the key results area, accountabilities, objectives or various roles played and organizations performance targets. It also explores individual cause of undesired performance, documents key performance concerns, and establishes a set of achievable targets.
Sales performance enables the organization to identify customer needs, problems and needs of the business goals. Sales performance provides a strategy for quality services, increased efficiency and accountability (Rodriguez and Honeycutt (2011). These authors believe that sales performance quality results are a conscious effort that achievers consistently desire. Odongo, (2014), therefore suggests that, employees should be given the necessary skills and knowledge through training and empowering them to act in customers’ and business’ interests to improve the sales performance of business enterprise.
2.6 Conclusion
Basing on the reviewed literature, many scholars have acknowledged that, for any business to prosper in terms of good performance, it has to integrate both financial and non-financial skills in its objectives in order to be in position to have a favorable performance. For informal businesses, for example, the Business development skill for instance; financial literacy, management skills, marketing skills, frequent and timely flow of information in the business, attention to customer complaints, timely delivery and service standards based on customers among others, are very vital for reasonable performance of the businesses. Hence the involved management should enroll for programmes if they can access them, since they have an adverse effect on business performance.
2.7 Research gap
Despite the importance of the informal economy in massive creation of employment opportunities to a large number of entrepreneurs, research into the actual performance of informal businesses have remained relatively scant. These informal businesses allow individuals who pursue it, to overcome situations of poverty by providing basic needs to their families and as well as contributing to the local communities. However, the literature pertaining their performance has limited attention. This may however be attributed to the challenges in finding systematic, reliable financial data about how they operate. This is because most of them operate without being regulated by the authorities. For instance, most of them often lack formal documentation or governmental registration (Roy and Wheeler, 2006). The recent developments in microfinance have however provided the opportunity for scholars to empirically examine these informal businesses as they must register with the microfinance institutions in order to receive any funding or services.

As a result, there has been a number of studies been carried out on the performance of these informal businesses across the world with respect to the services they acquire from microfinance institutions. These studies include; Dhakal, (2016); Maddah, (2014); Mckelvie, (2017); Sandra, (2010); Wairimu & Mwilaria, (2017); Wanambisi, (2013) among others. The studies largely explored the literature on the general contribution of microfinance institutions towards the well being of the small businesses. However, little information has been availed on how and the extent at which the performance of informal businesses has been enhanced through business development services from MFIs. Furthermore, many of them tend to show only the positive outcomes of microcredit towards informal businesses especially in many developing countries without pointing out the constraints involved too. This shows that there is concern in the research gap about the extent to which such credit facilities provided by microfinance institutions can be incorporated with business development services for instance; training in business management, financial literacy, and technical assistance among others in order to enhance the performance of these informal businesses. Hence, further research into understanding informal business performance through the partnership with business development services from microfinance institutions needs to be made


3.1 Introduction
The term research methodology means a system of explicit rules and procedures in which research is based on and against which claims of knowledge are evaluated (Saunders, Lewis, & Thornhill, 2009). This section therefore presents the methods that will be used to carry out the study on the role of microfinance institutions in enhancing performance among informal businesses in Uganda
3.2 Research design
A research design is simply a plan or a guide for data collection and analysis (Saunders, et al, 2009). This will employ a cross sectional study that will be based on both a qualitative and quantitative approaches. It will employ both quantitative and qualitative methods of data collection. The methods will include; survey and in-depth interviews which will be developed in reference to the stated objectives. This research design will ensure that the evidence to be obtained effectively addresses the study problem logically and as unambiguously as possible. A cross sectional design has the advantage of producing a good amount of responses from a wide range of people. According to Saunders, et al, (2009), cross section design enables a lot of information to be collected from a sizeable population in a highly economical way. Besides, it enables researchers to use smaller groups of people to make inferences about larger groups which would have been prohibitively expensive to study. cross section research design is very powerful in gaining insights and results, assistance in making inferences and in drawing conclusions (Kothari, 2004).
3.3 Research Approach
Research approach refers to plans and procedures for research that span the steps from a broad assumptions to detailed methods of data collection, analysis and interpretation (Creswell, 2014).
These plans involve several decisions that need to be taken in the order in which they make sense to the study and the order of their presentation based on the nature of the research problem or issue being addressed. The current study will adopt a mixed methods research approach of both quantitative and qualitative with each addressing a specific objective that has been stated. According to Kothari, (2004); Babbie, (2010), mixed research approaches are compatible and can collectively be used at once in a single study.

3.3 Study area and target population
The study will be carried out in Katwe, a Kampala suburb where Pride Microfinance has been selected as one of the microfinance institution of interest. The staff members of Pride microfinance will be among the study population in addition to entrepreneurs from informal businesses within the area of study. These will include; mechanics, metal fabricators, carpenters and food vendors who may have been benefited from Pride microfinance.
The rationale for choosing Pride Microfinance as a case study is that; amongst the Microfinance institutions that exist in Uganda, Pride Microfinance is the most leading MFI that provides innovative financial solutions to the economically vulnerable people. This institution also empowers people and communities in situations of poverty, financial illiteracy as well as enhancing financial inclusion. This is attained through extending to the beneficiaries of financial services at low interest rates of about 3 percent of the total amount lent. Its services are offered through a network of 33 networked branches spread across the country and 7 contact offices. It also offers small enterprise programme (SEP) to entrepreneurs seeking to expand existing small businesses and loans to enable them create new employment opportunities. The programme targets entrepreneurs, who would otherwise have limited access to the business development services due to lack of awareness.
3.4 Sampling techniques
According to Latham, (2007), sampling is the process of selecting units from a set of interested items from which the fairly generalization of the needed results is done. In this study purposive and simple random sampling will be used to obtain the required information from the target respondents.
• Purposive sampling
Also called judgment sampling, purposive sampling is a deliberate non-random method of sampling, which aims at selecting items or a group of respondents with particular characteristics because of being knowledgeable about a given phenomenon in the research process (Watt, 2012). This method will be used to gather qualitative sample for instance, information from Pride microfinance staff.
• Simple random sampling
Simple random sampling technique is a technique, in which each unit (e.g., persons, cases) in the accessible population has an equal chance of being included in the sample on independent selections (Teddlie & Yu, 2007, pg. 79). This method will be used to select respondents from informal businesses in the area of study.
3.5 Sample size
The appropriate sample size for this study will be 96 respondents. This sample size has been arrived at by using the formula below as recommended by William Cochran (1980) for computing the sample size from unknown population
n = t?2/ (4d2)
Where n= the sample size
t= t-value from t-tables,
d= maximum permissible error (10%)
?= level of significance (5%)
Thus, n= (1.962)2/ (4 x 0.01)
n? 96 Respondents
The structure will be chosen as shown below;
Method Number Pride MFI Informal business
Females Males Females Males
Key informant interviews 8 2 2 2 2
Individual interviews 12 3 3 3 3
Survey (use of questionnaires) 76 10 10 28 28
Total 96

3.6 Data collection
3.6.1 Data Collection methods
The study will employ survey and interviews will be used to collect the required data. According to Kumar, (2011), an interview is a set of questions administered through oral or verbal between the researcher and the respondent. The interview method will be administered among both individual from the informal businesses and the key informants such as MFIs administrators and employees. The survey will also be carried out among the respondents who may feel uncomfortable to give their opinion through the interviews.
3.6.2 Research instruments
The study will apply 2 categories of research instruments namely; interview guide for both the key informants and individual interviews. The questionnaires will be administered among those respondents who will be in position to read and write.
3.7 Data management
Quantitative data collected will be captured into Microsoft spread sheet, whereby they will be coded to check for errors and inconsistence. A copy of data will be stored on a back up device like a flash disk or an external hard drive for emergency cases if any. For instance, the data getting corrupted by the virus or the laptop being stolen.
3.8 Data analysis
The collected data on the role of MFIs in enhancing the performance of informal business will be cleaned, processed and analyzed as discussed below;
Qualitative data: The data collected from interviews will carefully be cleaned and sorted to eliminate the inconsistencies and errors that may have been made during the data collection. Data collected through audio recording will be transcribed, reviewed, organized and later coded and categorized into themes and finally interpreted. Interpretation will be done according to the identified thematic areas to create meaning of what will have been collected from the field in line with the stated objectives.
Quantitative data: Data that will be collected through use of questionnaires and will be analyzed quantitatively by performing some simple cross tabulation as a way of ascertaining the distributions of the information. The researchers will use statistical Package for Social Sciences (SPSS) and Microsoft excel programs for generating interpretable analysis results which will then be presented in form of distribution tables, charts, graphs among others.
3.9 Data Presentation and Analysis
Qualitative information will be analyzed thematically through transcribing the responses especially from interviews and open ended questions into the required outputs in line with the stated objectives. On the other hand, some quantitative information will be analyzed through use of inferential methods such as cross tabulations in order to produce the required outputs. The presentation of the quantitative output will involve use of frequency distribution tables, graphs and charts. While qualitative information will be presented descriptively.

3.10 Ethical consideration

Standard research ethics will be observed for instance;
? Necessary approvals will be followed
? The confidentiality of information unveiled by research subjects and the anonymity of respondents will be respected.
? The participation in the study will be on a voluntary basis and free from any coercion and harm.
3.11 Anticipated study limitations and how to overcome them
In this study, some of the limitations may arise, and these may include the following;
? Most of the respondents (business owners and administrators) may be busy with their work schedules, so they may not be in position give the researcher enough time to get the information that is required from them. This problem will be overcome through making early appointments with them before data collection date in order to avoid collisions.
? Respondents may fear to disclosure some of the information due to personal reasons, however, the researcher will assure them that the information to be collected will only be used for academic purposes in that none of its content will be disclosed without their consent


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