The Impact of Access to Credit on the Performance of Small and Medium Size Enterprises in Uganda: A Case Study of Wandegeya, Kampala
Muhumuza, AK Daisy
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The main objective of the study was to examine the impact of access to credit on SMEs performance in Wandegeya, Kampala. The study further had three specific objectives which were; to ascertain challenges associated with operating SMEs, to examine the impact of access to credit on the profitability of SMEs and to assess the impact of lending terms on credit access by SMEs. The study population comprised of both male and female traders who own SMEs in Wandegeya, Kampala District. The area has various types of small and medium sized enterprises that have mushroomed due to the rapid urban population coupled with unemployment. To obtain the sample size, Fisher’s method of sampling was used to select a sample of 120 respondents. A simple random selection was used because it is convenient, time saving and does not create room for bias. This primary data was therefore coded and entered into STATA 13.0 computer program for analysis. The process of data analysis involved several stages; the completed questionnaires was edited for completeness and consistency, checked for errors and omissions and then coded. Descriptive, correlation, linear regression analysis, demographics were analyzed using frequencies and percentages and factor analysis was also used. Study results from chi-square showed that the p-value of interest rate is 0.01 which is less than 0.05. This therefore implies that there is a significant relationship between interest rate and access to credit at 95% significance level. Results about interest rate show that from the respondents that have access to credit; 45 said the interest rate they paid was high, 40 said the interest rate was moderate while 15 said the interest rate was low. Furthermore, Chi-square results as seen showed that the p-value of payment time is 0.04 which is less than 0.05. This therefore implies that there is a significant relationship between payment time and access to credit at 95% significance level. Results about payment time further show that from the respondents that have access to credit; 25 always pay their loans on a weekly basis, 70 always pay their loans on a monthly basis while 25 always pay their loans on an annual basis. The regression results in showed a statistically significant positive relationship at (at 5 percent level of significance) between the age of the person operating SMEs and the profits of SMEs in Wandegeya in this study since it’s P-value (0.01) is less than 0.05. The study further recommends that in order to deal with the problem of funding, institutions and government have to put up some intervention measures to rescue the problem that persists.