Microfinance Services and Performance of Small and Medium Enterprises. Case Study: Mpigi Trading Centre

Abstract

The study was focused on establishing the effect of microfinance services on the performance of SMEs within Mpigi trading center.. The research objectives were examine the relationship between technical assistance and SMEs, to establish a relationship between Credit Facilities and performance of SMEs and also to determine the relationship between Saving Schemes and performance of SMEs.

A cross sectional survey design with both qualitative and quantitative approaches e was employed for the first-time on respondents that owned small and medium sized enterprises within Mpigi. The study also employed a self-administered questionnaire as a research instrument and it comprised of both open and close ended questions relating microfinance services covering areas of Technical assistance, credit facilities and saving schemes as well as questions relating to SME performance in terms of profit growth, sales growth and liquidity.

The population considered for the study was160 respondents from which a sample size of 118 was chosen basing on the krejcie and Morgan table of sample size selection criteria.

Data that was collected from the respondents was analyzed and coded using the social package for social scientists with the help of data computations elements so as to generate tables showing means, percentages, standard deviations as well as charts including pie charts, and bar graphs that were clearly explained.

Descriptive statistics were also generated for all the dimensions under both the dependent and independent variable and were explained using a scale ranging from strongly disagree to strongly agree as well as the rate at which responses were deviating from the mean figure.

The results generated from the study showed that there was a positive and significant relationship between technical assistance and performance (r= 0.973) and significant and positive relationship between credit facilities and performance (r = 0.994) as well a positive relationship between saving schemes and performance (r= 0.674), meaning that the research questions were answered as anticipated.

The main challenges experienced in accessing microfinance included; increasing stress levels, high interest rates offered by microfinance institutions, difficulty in adapting to new rules and regulations governing microfinance lending, lack of collateral security, inflation, depreciation of the shilling, lack of proper training by microfinance institutions.

The recommendations were to set clear goals and objectives, improving governance and management structures,concentrating on planning and preparation, and investment in more training of employees.

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