A study of the factors affecting the performance of small and medium size enterprises in Uganda: a case study of Makindye Division Kampala District.

Abstract

This study focused on addressing the factors affecting the performance of SMEs in Makindye Division Kampala. SMEs play a significant role to the growth of Uganda's economy by creating employment, generating income and helping in poverty reduction. In order to survive and prosper small businesses need a conducive and supportive business environment. The purpose of this study was therefore to find out the factors that affect the performance of SMEs in Makindye Division. The study was exploratory in nature and adopted a cross-sectional survey design. The study was conducted in Makindye Division covering SMEs within the geographical area. The study used a sample size of 189 respondents selected using simple random sampling method from the target population in Makindye Division. Data was collected using structured questionnaire and interview with the business owners. Data was analyzed using frequencies and percentages and the results presented using tables. Both descriptive and empirical methods were applied during the study. The regression results show that, the significant factors which affect SMEs performance were: demographic factors (age and education level of SMEs owners), business characteristics (capital structure) and institution characteristics (access to finance and business information). On the other hand, demographic characteristics (sex of respondent) and business characteristics (age of SMEs) insignificantly contribute to the SMEs performance. This study recommends for policy makers to make sure that education is given to the SMEs owners and employees by providing appropriate business and entrepreneurial knowledge and skills which will encourage them to start and manage business successfully. There is also, a need for the government to make sure that, businessmen and women are enabled to have access to loans at favorable conditions from banks and other financial intermediaries for expanding their businesses. Moreover, soft loans should be provided to those who want to open up new businesses and encourage women to engage in SMEs activities.