Factors affecting expansion of small and micro enterprises in Mbarara municipality

Abstract

The study mainly assessed factors affecting expansion of small and micro enterprises in Mbarara City; specifically, the effect of owner` education level, access to credit and record keeping. The study used a cross-sectional research design where a sample of 100 SMEs was considered for the study. Data was collected through offering a self-administered questionnaire with the SMEs/Operators which was well pre-tested and designed and data processing was done in STATA Version 15 At total sample of 100 SME owners/operators in Mbarara City participated in the study. Majority of the respondent were females (54%), aged 21 to 40 years (73%), had attained only primary or secondary education (71%). Most of the SMEs were dealing in general trade (37%) that is retail and wholesale trade, restaurant/bar (26%) and hair and beauty salons (26%). On average, most of the SMEs were generating 10 to 19 million (37%) and 20 to 34 million Uganda shilling annual turnover and majority (67%) of the SMEs employed one to four individuals. With regard to expansion of business, 59% of the SME owners/operators reported that their business had expanded since they started it and for the 41% whose business had not expanded it was mainly due to limited capital, high operating costs like rent and limited access to credit. On the aspect of SME`s access to credit and recording keeping, only 37% and 64% of the SMEs had ever applied for the loan and kept financial record respectively. Chi-square results at bivariate analysis revealed that owner`s/operator`s education level, access to credit and record keeping significantly influenced SMEs expansions and at further analysis, binary logistic regression results revealed that only access to credit and record keeping significantly influenced SMEs expansion where SMEs that were not accessing credit and keeping financial records were less likely to expand as compared to those that accessed credit and kept financial records respectively The study recommends SMEs operators to endeavor to keep proper financial records because the cost involved in business failure as a result of lack of proper record keeping outweigh the cost of good record keeping for a business. More so, there is need for government to formulate policies and strategies that can easy access of credit among small and medium enterprises in order to boost their growth and success. Also, SMEs operators are encouraged to start up or join business saving and credit associations in order to easily access credit at low interest rates with even less collateral security to inject in the businesses