The Role of Credit Finance on the Performance of Agricultural Based Small and Medium Enterprises (Smes) in Uganda a Case Study of Small and Medium Enterprises in Kotido Town Council, Jie County in Kotido District

Abstract

The main aim of the study was to examine the relationship between credit finance and agricultural basedSME performance. It was carried out in Kotido Town Council in Kotido District. The purpose of the study was to examine the effect of credit finance on the agricultural based small and medium enterprises. The concept of credit finance was limited to small business loans, agricultural loans and collateral security while performance was limited to profit, market share and stock turnover.

The study employed a case study research design which involved an intensive analysis of research variables. The study used a sample size of 73 respondents which comprised of traders who deal in agricultural input enterprises and those who deal in agricultural produce. Purposive sampling was used to select the respondents. The respondents were issued with closed ended and open ended questions.

The study found out that various loan options boost the performance of SMEs and that collateral security motivate the SMEs to work hard as indicated by the bigger percentage of the respondents. The study concludes that credit finance has a positive impact on the performance of agricultural based SMEs and therefore, suggests that credit institutions should continue advancing loans to the SMEs and also continue giving them other necessary support such as training.

The findings revealed that small business loans boost growth of the enterprises. The study concludes that the small business loans are vital in boosting the performance of SMEs and recommends that the credit institutions should continue advancing small business loans. The findings on agricultural loans reveal that agricultural credit institutions not only provide loan nut also but also other services like training that help to improve on the performance of agricultural based enterprise. The study therefore concludes that agricultural loans help farmers increase their profitability and market share and recommends that the interest drawback program be extended to benefit all the agricultural sectors in all regions.

The findings on collateral security indicate that collateral security has a positive impact on the performance of the SMEs as they are motivated to work hard so as to recover the collateral pledged. The study therefore concludes that collateral securities are essential in improving the performance of SMEs and recommends that the SMEs be trained on loan management.

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