The Effects of Micro Finance Institutions on the Performance of Small and Medium Enterprises a Case Study of Moyo Sacco

Abstract

The research was carried out to investigate the effects of microfinance institutions on the performance of small and medium enterprises. The research questions were; what are the contributions of Micro credits on the performance of small and medium enterprises in Moyo District?, How is Micro finance credit savings effective on the performance of small and medium enterprises in Moyo district?, What are the effects of group lending by microfinance institutions on the performance of small and medium enterprises in Moyo district?

The study was conducted in Moyo District, at Moyo SACCO and among the business community. The study was predominantly qualitative, utilizing an exploratory, descriptive statistics on research objectives. A qualitative approach was used during data collection and presentation, and quantitative approach was used for the analysis and presentation of the findings. A simple random sampling was used to select 54 respondents to represent the sampled population of 60 people.

According to the findings, majority of the respondents (81.5%) have believed that the microfinance credits have positively contributed to the performance of SMEs in the following ways; micro credit increases the capital base for startup businesses and expansion of businesses which has resulted in reduction of poverty among the people, it encourages savings among the small and medium enterprises for future investment which reduced their liquidity constraints and also increases capital accumulation among them. While other respondents (18.5%) believed that the micro credit services have exploited the small and medium enterprises in Moyo district in a way that the cost of capital charged on the loan is very high for some borrowers which affected them negatively.

Most services or rather products that are consumed include loan acquisition, Agricultural loans, Financial advices, savings accounts, fixed savings, commercial or cooperative support, and school fees loan. Some people lamented that those MFIs do not understand the urgency of the loans wanted. Another reason for this complexity was attributed to rigidity as to what collateral security is a prerequisite for obtaining the loan.

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