The effect of long-term financing on the performance of SMEs in Konyo Konyo market in Juba, south Sudan

Abstract

This thesis entitled “long term financing and the performance of SMEs” is presented as a result of a study conducted in Konyo-Konyo market in Juba, South Sudan. The study was based on three specific objectives; to examine the effect of equity financing on the performance of small and medium enterprises; to evaluate the effect of debt financing on the performance of small and medium enterprises and to examine the effect of mortgage financing on the performance of small and medium enterprises. The study adopted a case study design and used a sample of 100 respondents from four types of SME businesses: textiles, foodstuffs, hardware and general merchandise as well as secretarial and stationery supplies. The study found out that long term financing has a significant positive effect on the performance of SMEs. It also found out that most of the businesses in Konyo-Konyo market depend on equity financing, specifically internal/owner‟s equity, which has a positive effect on the performance of SMEs. It also found out that debt financing has a positive effect on SME performance, but this effect diminishes over time due to debt repayment obligations that affect the performance. Also, mortgage financing was found to have a positive effect on SME performance, but that fewer businesses have access to mortgage financing due to lack of the collateral security. The study concluded that indeed there was a significant positive relationship between long term financing and the performance of SMEs. The study recommended the SME to come up with ways to increase the amount of liquid stocks in order to increase financial viability, that SME owners should utilize funding from equity financing to ensure achievement of the targeted profit; and that SMEs should avoid situations where they are highly leveraged long longer term debt since this may lead to bankruptcy if they are unable to make payments on their debt obligation when due and SME owners should also make good investment decisions in order to increase profitability.