| dc.description.abstract | The study was about Effect of Interest Rates on Performance of Small and Medium Scale
Enterprises in Kakoba Division Mbarara Municipality. The study was aimed at finding out
whether fixed interest rates have any effect on the loan acquired by SMEs, establish the
relationship between flexible interest rates and performance of SMEs and also relationship
between split interest rates and performance of SMEs. The study adopted a case study design
that was descriptive in nature. The study population comprised primarily of small and
medium scale enterprise owners. Questionnaire and documentary review were the data
collection methods used for the study. Data was analysed quantitatively using SPSS program
to generate descriptive statistics and triangulated with secondary data.
The findings indicated that there was a relationship between split, flexible and fixed interest
rate on SME performance. Among the three types, fixed interest rates were commonly used
while split interest rates were the least used interest rates by SME owners. The advantages of
acquiring loans have been associated with increasing profitability of the firms that utilize
these loans. The disadvantages have been increased business risks in form of high interest
rates, reduced liquidity ratios and costs of running the business. The findings revealed that the
interest rates on loans have led to improved performance of most SMEs in Kakoba division
by enabling the underserved businesses to expand and increase their profits, given that
profitability has been the main goal of doing business. The financial institutions should also
endeavour to educate the owners of SMEs on the different loan packages and related interest
rate types and how these calculated to avoid mismanagement and loan default in the end. | en_US |
