The Effect of Credit Terms on the Performance of Small and Medium-Sized Enterprises Case Study of Nakawa Division, Kampala District

Abstract

The study aimed at assessing the effect of credit terms on the performance of SMEs in Uganda, case study being Nakawa Division. The researcher used a case study research design with both qualitative and quantitative methods with a population study of 576 SMEs out of which a sample size of 92 SMEs were chosen. Using purposive and convenience sampling techniques respondents were chosen from the area and these were SMEs in Nakawa division. Both questionnaires and interview guides were used to collect data from the selected respondents. Both the primary and secondary data was used during collection of data. Data was collected by use of questionnaires, interview guides and analyzed in form of tables, graphs and pie charts.

Findings revealed that interest rates have a positive effect on the performance of SMEs despite the magnitude is not very significant, E-payment has on Performance of SMEs thus implying that collateral security affects Performance of SMEs and credit terms impact on Performance of SMEs thus implying that credit terms affects Performance of SMEs to a small extent.

Finally the researcher recommended that the credit providers should issue credit at low interest rates affordable to their clients, they should also not strictly base on the collateral security as a determinant for someone to access credit and they should make credit terms and conditions simply to their clients. This will encourage debtors to access credit to boost the operation of their SMEs.

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