The role of micro financial services on the performance of small-medium enterprises in Uganda

Abstract

This paper sought to investigate the role of micro finance services on the performance of SMEs in Uganda particularly Abim Town Council. The survey research design was used. A target population of 95 registered SMEs operating different types of businesses was used in this study. Probability sampling was used to select the 76 respondents from the population. A structured questionnaire and interview guide were used to collect primary data from owner managers in SMEs. Interview responses were analyzed by content analysis and questionnaire responses were analyzed using Statistical Package for Social Sciences tool and Microsoft Office Excel software. The results indicated that the Micro financial services have positive impact to the performance of SMEs. The results also indicated that micro credit loans obtained from MFIs were involved in default. Much as there were few MFIs within the town council, most of the poor people preferred saving at home in clay piggy banks, inside bamboo sticks, tuck between roof sheets, buried in the earth or sewn in to pockets in petty coats because this home bag is too easy to withdraw from at no cost. The study also concluded that SMEs do not only need financial support from government but also need support in research, quality assurance, marketing, financial management and technology. The study recommended that SMEs should use venture capital rather than debt financing and SMEs should also form groups and make use of pooled negotiating power for borrowing purposes. Further, the study recommended the decentralization of operating of support institutions such as Centenary bank, Thur village bank in order to reach SMEs operating in small towns and remote areas of the country