Intellectual capital and competitive advantage in Uganda’s microfinance industry

Abstract

The mushrooming and wide spread of institutions engaged in providing diverse financial services to both organizations and communities have caused stiff competition in the microfinance industry. Players in the Microfinance industry are facing stiff competition than ever before (CGAP, 2002; Adongo & Christopher, 2005). Notwithstanding its adverse effects, competition is seen as health a phenomenon that is capable of improving quality of service and efficiency in firms. Majority of financial institutions has recognized that a sustainable solution to a competitive environment lies in building more efficient and strong financial institutions that are capable of cultivating strategic assets that are firm specific. Barney (1991) regards such assets are those that are internally controlled and permit the firm to formulate and implement strategies that expand its efficiency and effectiveness. Stiles and Kulvisaechana (2004) observed that such assets are valuable, rare, and hard-to imitate, and, above all, they are firm specific. Competitive advantage is, thus, dependent not, as traditionally assumed, on such bases as natural resources, technology or economies of scale, since these are increasingly easy to imitate. Rather, competitive advantage is, according to the resource-based view, dependent on the valuable, rare, and hard-to-imitate resources that reside within an organization (Barney, 1991; Stiles & Kulvisaechana, 2004). They are indeed the assets which Stewart (1997) referred to as ' invisible assets,’ which in a real sense is intellectual capital.