Credit access and performance of small and medium enterprises in Uganda: a case of Kamuli municipality

Abstract

The purpose of the study was to examine the effect of credit access on the performance of SMEs in Kamuli Municipality. The study was guided by three objectives, namely: To find out effect of cost of loans, loan period and loan size on the performance of SMEs in Kamuli Municipality. The study undertook a descriptive cross-sectional survey research design with both quantitative and qualitative techniques employed involving sample of 80 SMEs was randomly selected using simple random sampling. The study objectives were tested using Pearson Correlation Coefficient Index. The findings of the study revealed that cost of loans, loan period and loan size have a positive significant effect on the performance of SMEs in Kamuli Municipality. The study concluded that existence and performance of SMEs is not a product of only on one ingredient, but requires interplay of different inputs ranging from availability of enough credit, favorable cost of loans, sizable loans, ample loan repayment period, and good economic policies among others. It was therefore recommended that for SMEs in Kamuli Municipality to perform and thrive, owners should be disciplined in managing business finance, they should be encouraged to form cooperatives in order to easily access credit with favorable credit terms. Government through its agencies like ministry of finance, ministry of trade, Uganda investment authority, Uganda Revenue Authority among others should put in place policies that enable SMEs to thrive and grow finally, Finance institutions like commercial banks, micro finance institutions should design and extend favorable credit packages for SMEs so to enable them to sustainably exist and continue to grow.