The Effect of Interest Rates on Credit Accessibility by Small and Medium Enterprises in Kakili Sub-County, Wakiso district.
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The purpose of the study was to determine the effect of interest rates on credit accessibility by small and medium enterprises in Kakiri sub-county. To achieve this, the study had two objectives which were (1) to characterize small and medium enterprises by credit access and (2) to determine the factors affecting credit accessibility by small and medium enterprises. The study employed a descriptive research design where a sample of 60 respondents was selected randomly to avoid bias. Structured questionnaires were used to collect data which was then cleaned and analyzed using micro soft excel and SPSS software. The results indicated that the majority of the respondents were males (53.3%) who had security required for loan accessibility. The results also showed that most of the respondents had attained at least primary education meaning that a least they knew how to read and write when commencing a contract. Businessmen and women greatly accessed loans (55%), this was because most of them could easily use their business as security. The t-test method was used to analyze the factors that determine enterprise type. The results indicated that the ttime spent in business had no significant influence towards enterprise type of the respondents since p>0.05 and t=0.320, t=0.586 at the 95% confidencial interval. The estimated sales volume of the enterprise was also found not to have a significant influence towards enterprise type of the respondents since p>0.05 and t=-4.022, t=-4.431 at 95% confidencial interval. The results revealed that the number of empolyees had a significant influence towards enterprise type since p<0.05 and t=-2.055, t=-1.380 at the 95% confidential interval. The study also revealed that availability of loan association, collateral, business location, loan benefit, loan purpose, education level, and age of the respondent was insignificant. The gender of the respondents was found to be significant since the p-value was less than 0.05 at the level of significance (p=0.036). The researcher also recommended that the owners and managers of SMEs should ensure appropriate planning before accessing credits to avoid failure to pay back the loans, the government should validate legislation that regulates MFLs and other lending institutions to ensure that the interest rates charged are affordable to SMEs, maximum research should be carried out by the lending institution management on customers’ needs to establish friendly interest rates and that the government should open up more lending in the rural areas to improve on the accessibility by SME owners and reduce exploitation of the customers by the private institutions like money lenders who charge high-interest rate.