The impact of the access to finance on the financial performance of small medium enterprises: a case study of Lira city, Northern Uganda.

Abstract

This study examined the effect of access to finance on financial performance of SMEs. The study was guided by the following objectives notably, to examine the effect of cost of credit on financial performance of SMEs, to examine the effect of collateral security on financial performance of SMEs and to assess the effect of access to information on financial performance of SMEs in Uganda. The study used a cross sectional research design, and a quantitative approach. Data was collected from a target population of 100 of employees with accessible unit of 80 operators of SMEs, using simple random and purposive sampling techniques. Data were collected with the aid of closed ended questionnaire and Statistical Packages for Social Sciences was employed for analysing data from which frequency tables, descriptive statistics (mean and standard deviation), reliability, validity, correlation, and regression results were obtained. The study findings revealed that there is a positive and a significant effect of cost of credit and financial performance of SMEs, collateral security and financial performance of SMEs and access to information and financial performance of SMEs. The study concludes that there is a strong predictive power that the dimensions of access to finance contribute towards enhancing financial performance of SMEs in Lira City. Finally, the study, recommends that efforts to improve the financial performance of SMEs depends on access to finance (cost of credit, collateral security and access to information).