The effect of microfinance services on the performance of small scale businesses:

Abstract

This study examined effects of microfinance services on small scale businesses in Kayabwe trading centre Mpigi district. The issue of microfinance service provision to the development and growth of small scale businesses has always been critically looked at. Before the establishments of micro finance service providing institutions, small scale businesses didn’t have anyone to turn to as the financial institutions always neglected them due to their small capital base and even, they could not give them loans due to their little or no collateral security. After their establishment, there has been a change in the mind set of business owners as they have turned to them for help. The researcher critically looked at how loans, savings accounts and interest rates affect the operations of these small scale businesses. The data was collected by using both questionnaires and interview guides were also used. The population of the study was the small scale business owners and attendants who were 50 respondents who filled up the questionnaires. The return rate of data collection was 41 questionnaires which represents 82%. Data collected was analyzed electronically using the SPSS method of analysis. Results of the study indicated that 51.2% were females and 48.8% were males which shows an increase in the involvement of women in businesses in this particular area. Also the researcher found out that 75.6% of the respondents had ever taken a microfinance loan which shows trust in xi the service and loans of these micro finance loans. It was also found out by the researcher that the interest rates given out to the respondents were favourable representing a 52.2% and that these interest rates had improved their income by 63.4% whereas the researcher found out that 100% of the respondents have savings accounts in these micro finance institutions. The researcher recommends that the micro finance institutions should train these small scale businesses on record keeping to track their profits and that they should also be innovative to stop over reliance on the small scale businesses income which always fluctuates and also these institutions should increase their repayment periods to help these businesses pay their loan schedules in times