Impact of savings and credit cooperatives (SACCOs) interest rate on the performance of SMEs in Uganda: a case study of Kaleerwe town

Abstract

This study was conducted in Kaleerwe town in Kawempe division by interviewing the business owners. The main objective of the study was to assess the impact of savings and credit cooperatives (SACCOs) interest rate on the performance of SMEs in Uganda a case study of Kaleerwe town using the binary logistic regression model. The study specifically aimed at to establish the effect of SACCOs’ interest rate on credit and the personal attributes (Age and education level) of the SMEs’ owners on the performance of SMEs in Uganda. The study adopted a cross-sectional survey design and collected data from 96 small and medium business owners who were selected using simple random sampling technique and were asked to answer the questionnaires. The data was organized in Excel and analyzed using SPSS and STATA. Descriptive statistics of frequency counts and percentages were used at univariate level and hypothesis testing was done at 5% level of significance. Chi-square test was used to test the relationship between two study categorical variables and a binary logistic regression model was assumed for the study. The study results indicated that 52.00% of the respondents were males and 48.00% were females, 47.92% of the respondents were aged between 25 years and 30 years, 31.25% were above 30 years and 20.83% were aged between 15 and 24 years, 41.67% of the respondents had acquired secondary education, followed by 34.38% who had acquired primary education, 17.71% had acquired tertiary education and only 6.25% had no education. The binary logistic regression results indicated that age, education level of the business owner , amount of money borrowed and interest rate on loan significantly affect the performance of the SACCO. The study concluded that age, education level, amount of money borrowed from the SACCO and SACCO interest rate on loan influence the performance of SMEs. The study recommended that the government of the republic of Uganda should effectively implement the youth livelihood programme and also subsidize the micro-finance institutions in the semi-urban areas of Uganda.