Factors associated with access to credit among small business enterprises in Ntungamo municipality

Abstract

Despite small business enterprises making the majority of the businesses worldwide and their significant role in job creation and global economic development, about half of the formal SMEs don`t have access to formal credit. The present study assessed factors associated with access to credit among small businesses in Ntungamo Municipality. The study employed a cross-sectional research design where a sample of 100 SMEs was selected to participate in the study. Collected data was analyzed using STATA version at univariate, bivariate and multivariate Majority of the business owner/operators were males (53%), aged 30 years and above (85%) and had attained at least secondary education (60%). Over 60% of the of the businesses had operated for 6 or more years with most of them dealing in general trade (30%), hair and beauty salon (15%), restaurant/bars (12%) and drug shop/pharmacy (10%). Most of the businesses generated 10 to 35 million UGX annual turnovers (89%) and were employing 3 or more persons (87%). At bivariate analysis, age and education level of the business owner/operator, time spent operating, nature of business and annual turnover were significantly associated with access to credit among small businesses in Ntungamo Municipality. At further analysis, education level of the business owner/operator, time spent operating, nature of business and annual turnover were significantly associated with access to credit where business owner by individual that attained at least secondary education, those that had spent over 6 years operating, dealing in general trade and businesses generating 21 to 50 million UGX annual turnover were more likely to access credit. The study recommends the government and formal financial institutions to easy access to formal loan among small businesses especially those operated by less educated individuals since their odds of acquiring formal credit were less. There is also a need for financial institutions to provide credit packages for the starting businesses in order to increase their access to credit since their likelihood of accessing credit is relatively lower as compared to older businesses.