Effect of microfinance services on the performance of small and medium enterprises: Case study Juba city

Abstract

Small and Medium Enterprises (SMEs) play an important role in the socio-economic development of any country. They provide an appropriate channel for the achievement of national macroeconomic objective in terms of employment generation at low investment cost and enhancement of apprenticeship training. The objectives of the study was to examine the effect of credit on the performance of SMEs in Juba city, to assess the role of training on the performance of SMEs in Juba city and to assess how mobilization of savings affects growth of SMEs. This research problem was studied through the use of a descriptive research design. The research sample for study was50 respondents of which 39 responded. This research study used purposive sampling technique and specifically the judgmental sampling method to select 39 SMEs which is representative of the target. Primary data was gathered through structured questionnaires. The data was then analyzed using SPSS v20 software package. The linear regression model was applicable since it allowed simultaneous investigation of the correlations among different variables. Multivariate regression model was applied to determine the relative importance of each of the three variables; microcredit, savings and training, with respect to the effects of microfinance services on the performance SMEs. The data findings analyzed also shows that taking all other independent variables at zero, a unit decrease in Microcredit provided by MFI will lead to a (-0.569) decrease in the performance of the SME; a unit increase in savings showed a 0.340 of the SME increase in performance but was not significant predictor of performance, while a unit decrease in training services provided to the SME will lead to a (-0.298) decrease in performance of the SME. The ANOVA analysis was intended to investigate whether the variation in the independent variables explains the observed variance in the outcome. The ANOVA findings in this study showed that at 5% level of significance and 95% level of confidence, the study found out that Microfinance services, microcredit, savings and training were all significant in the performance of the SME. Based on the key findings, the study made the following recommendations. Microfinance Institutions should enhance training of their clients on the entrepreneurial skills so as to enhance their skills as a large proportion of the respondents were found to be certificate holders of high school graduates hence they lacked the necessary business management skills. The study also recommends the MFIs carry out sensitization campaigns on the need to save among the SMEs. The study also recommends that the MFIs use that traders savings as part of collateral since most may not have large tracts of land or the physical collateral needed.