Commercial bank credit and performance of small scale businesses; Case study: Kakoba division

Abstract

Small scale businesses are the catalyst for economic growth in most developing countries thus, the basic objective of this study was to examine the effect of commercial bank credit on Small scale businesses (SSBs) in Mbarara, Municipality Kakoba Division. The specific objectives of the study were; to assess the relationship between mortgage loans and SSBs, examine the relationship between secured loans and SSBs and to investigate the relationship between business loans and performance of SSBs. Simple random sampling technique was engaged in selecting the 72 SSBs that constituted the sample size of the research. Structured questionnaire was designed to facilitate the acquisition of relevant data which was used for analysis. Descriptive statistics which involved simple percentage mean and standard deviation was tactically applied in data presentations and analysis. The findings of the study revealed that commercial bank credit has been advantageous to Small scale businesses though only few of them were capable enough to secure the required amount needed. Interestingly, majority of the SSBs acknowledge positive contributions of loans towards their development especially in business world. Commercial banks should assess their interest rate towards small scale businesses since their profits are low and margined and also share best practices with their SSB customers especially on the efficient use of loans; this will boost their productivity and support SSBs. Therefore, the first and complete means for analyzing and monitoring the overall Commercial bank credit to the performance of small scale businesses which can be designed to observe the SSBs needs as it takes their characteristics into account hence a base for further research in the field of Small Scale Businesses and bank credit performance.