Group loans and the performance of small and medium enterprises: case study Centenary Bank Kireka branch

Abstract

Small and Medium Enterprises are the catalyst for economic growth in most economies thus, the fundamental objective of this study was to investigate the impact of group loanson the performance of Small and Medium Enterprises (SMEs) in Uganda in line with the following objectives of the study; to investigate the relationship between group size and the performance of SME’S, to find out the relationship between loan size on the performance of SME’S and lastly to examine the relationship between social ties and the performance of SME’s so that the ability of SMEs to develop positively and drive economic growth in the Uganda becomes real. Stratified random sampling technique was employed in selecting the 80 respondents that constituted the sample size of the research. Structured questionnaires were designed to facilitate the acquisition of relevant data which was used for analysis. Descriptive statistics from the SPSS package which involved simple percentage, frequencies, graphical charts and illustrations were tactically applied in data presentations and analysis. The findings of the study revealed that although capital is key for the sustainability and growth of SME’s, it must be raised in the right way basing on the necessary documentation for instance you cannot claim for a loan of as much as one hundred million UGX if your monthly cash inflows say are two million UGX and yet you are expected to pay back within one year. It is recommended that banks and microfinance institutions review their interest rate down wards and also share best practices with their SME customers especially on the efficient use of loans; to productivity and support SMEs in Uganda.