Microfinance financing and business performance of SMES in Makindye division
Abstract
Finance and its associated services are a crucial prerequisite in the initiation and progress of the
SMEs. The relationship that exists between microfinance financing and the business performance
of the Small Mid-size Enterprises in Makindye division, Kampala district was the main
objective/study purpose. To address, the study purpose, the study specifically addresses the
following study objectives which were; achieve the purpose which was to establish the relationship
between loan services, savings deposits, financial education/training, and policy on credit and
business performance of the SMEs of Makindye division. The study used only cross-sectional
research design supported by quantitative approaches. Using simple random sampling method 133
SME operators were selected as a sample size in Makindye division. The correlation results using
the spearman’s rank correlation test shows that loans services had a moderate significant
relationship with the business performance of SMEs in Makindye division (r=0.434, Pvalue<
0.01). The study showed a moderately positive and substantive correlation between savings
and SMEs' success in Makindye division (r=0.536, P-value<0.01). The study revealed that the
moderate significant relationship between financial training and business success in Makindye
Division was positive and significant, (r=0.652, P-value<0.01). Based on the findings the study
concluded that loans services, savings deposits, financial education/training, and the different
policies on credit play a pivot role in improving the performance of SMEs in Makindye division,
despite the existence of several challenges in the sector. To overcome some difficulties, MFIs
should revise the loan terms given to their borrowers and ensure that they are favourable for them
to access loans. The MFIs are recommended to provide enough loan repayment period to the SME
operators since this would provide space for them to pay loans. MFIs should provide easy and
convenient deposit and collection facilities for SMEs since this would encourage them to save and
thus improve financial performance. The SME operators should be sensitized to regularly attend
financial education/training organized by MFIs.