The contribution of microfinance institutions on the growth of small and medium enterprises in nyendo ssenyange division, Masaka municipality.

Abstract

This study intended to evaluate the contribution of Microfinance institutions on the growth of SMEs considering a case study of Masaka Microfinance Cooperative and Development Trust (MAMEDICOT) which is found in Nyendo Ssenyange division, Masaka Municipality, Masaka District located in the central part of Uganda. The review of Literature was collected using the set objectives which were, to examine the role of savings on the growth of SMEs in Masaka Microfinance and Development Cooperative Trust, Nyendo branch, to assess the contribution of loans on the growth of SMEs in Masaka Microfinance and Development Cooperative Trust, Nyendo branch and to examine the role of training on the growth of SMEs in Masaka Microfinance and Development Cooperative Trust, Nyendo branch. To achieve the set objectives, the tools used in collecting data involved use of questionnaires, and secondary data got from various books from the library and from the internet which made data collection and analysis easier. The study involved 50 respondents from MAMEDICOT and the study was guided by the economic theory. Data from the questionnaires was coded, entered, edited for consistency and easiness in and later analyzed using SPSS Software where pie – charts and bar graphs were constructed to establish the relationship that existed between microfinance institutions and the growth of SMEs. Conclusively, the researcher found out that saving services moderately enhanced the growth of SMEs. This is because saving services enabled SMEs to earn extra money in form of interests, increased the capital structure which enabled them to stay into business for a long time, used for future business projects or for business expansion, used as collateral to obtain a loan for the business, saving services had a favorable effect on the realization of desired business goals. On the other hand, majority of the respondents were not sure whether savings enable their businesses to cater for taxes in case they have to pay the taxes at the time they are supposed to be paid. The researcher recommended that the government should ensure that the microfinance institutions adhere to the laws and regulations of the businesses and country in a reasonable manner. The researcher also suggests that proper and extensive activities should be provided for clients who are granted loans. The loans should be client oriented and not product oriented. Therefore SMEs have a great responsibility to ensure the proper use of loans which is an important tool when it comes to the business acceleration.