THE ROLE OF MICROFINANCE SERVICES ON THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES

A CASE STUDY OF NAKAWA MARKET

ABSTRACT

The topicof study was the role of microfinance services on the performance of small and medium enterprises a case study of nakawa market. The study ws guided by the following objectives; to establish the Influence of loan provision on the performance of small and medium enterprises, to examine the effects of advisory services on the performance of small and medium enterprises and to establish the influence of Training on performance of small and medium enterprises.

The study made the following recommendations; the study indicated that loan acquisition in MFIs takes a long process and time and this affects the SMEs performance, the study also further noticed that MFIs do not provide training opportunities to SMEs something that is crucial to ensure continuous success of the MFIs as this could reduce on loan defaults and the study also concludes further that MFIs give loans according to the SMEs something that prevents SMEs from growing and therefore this in turn affects the performance of SMEs.

SMEs also

The study made the following recommendations; MFIs need to provide training opportunities to SMEs so as they get better knowledge in managing their Business,  MFIs need to reduce on the conditions to SMEs so as they can easily acquire capital need for the loans, and MFIs need also to offer advice to SMEs in order to ensure profitability and growth other business.

CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter covers the background of the study, statement of the problem, purpose of the study, objectives of the study, research questions, scope of the study, conceptual framework, and significance of the study and definitions of key terms.

1.1 Background to the study

The  practice  of micro finance  dates  back  to the early  1700 and can be traced  to the Irish  loan fund  system  which  provided  small  loans  to rural  poor  with  no collateral.   Over the years, the concept of micro finance spread to Latin America, then to Asia and later to Africa.  Today,  use of  the  expression   micro  financing   has  its  roots   in  the  1970s  when  organizations   such  as Grameen   Bank   of  Bangladesh    with   the  microfinance    Pioneer   Mohammed    Yunus,   were starting  and shaping  the modem  industry  of micro  financing  Mwangi  (2011). In the  early  1990s  with  the  opening  up of the political   space  and  disturbances,   the need  for the  credit  by  individual,   micro,  small  and  medium   enterprises   increased   and  this  led  to the recognition  of the micro finance  institution  globally.  Microfinance   as pioneered  in Bangladesh by Mohammed   Yunus  was  to assist  low-income   women  and  men  through  micro-enterprises for  their  economic   development.    Growing   conccms   about  poverty   stands   out  in  political agendas  all over the world,  as stubbornness   of poverty  even in the richest  nations  is being met with increasing  impatience  (Mwangi  et al,1993).

Microfinance program in Bangladesh shapes the idea of the poor and help them to practice money management, time management, encourage them to save money for future which is bringing a fruitful result by reducing poverty, empowering poor and promote rural economy. More than subsidies poor need access to credit. Absence of formal employment makes them none ‘bankable’. This forces them to borrow from local moneylenders at exorbitant interest rates. Many innovative institutional mechanisms have been developed across the world to enhance credit to poor even in the absence of formal mortgage. The reason why, the Grameen Bank followed the principle that “people should not come to the bank; the bank should go to the people” (Ledgerwood, 2000).

Globally, microfinance institutions provide credit services and other financial services to millions of populations across the globe. According to Harris (2002), microfinance lending, savings and financial services, provide the poor with an effective way to move out of poverty build income, create wealth and assets their mortgage risks. In developing countries, microfinance includes the provision of a broad range of financial services to the lower income class in the society. Microfinance entails the provision of retail financial services including, savings, credit, cash transfer, financial management, insurance and other financial services to the poor.

Most MFIs in Africa follow common strategies to run their businesses, especially at an infant stage: First, there is the strategy of business running businesses with a weekly cash flow. Second, the whole group guarantees for the loan of an individual member, making the group responsible for the repayment in case of individual default. Third, MFI costs are covered by charging interest rates. Fourth, the MFI requires mandatory savings and weekly group meetings for credit repayments (Morris, 2005).

According to the Uganda Microfinance Institution (UMFI) report (2011), microfinance in Uganda began to show face in the early 1990s and started to grow exponentially in the early 2000. The rapid deterioration of the Ugandan economy since 1999 coupled by high unemployment, by then officially pegged at levels exceeding 80%, led to the unprecedented growth of the informal sector in Uganda. Regrettably informal operators were unable to access funding from traditional capital providers (formal financial institutions), because they lacked collateral and they also found the modus operandi of traditional banks too demanding and intimidating. The sector has now over 25 years of experience providing financial services to households in poverty and has grown to become one of the biggest microfinance industries in Africa. Since 2005, microfinance is one of the pillars of the Uganda`s government development strategy (Rhyne, 2016).

According to Bitature (2008), Uganda Investment Authority reports that the Ugandan economy is supported mainly by SMEs contributing about 90% of the private sector production. SMEs are the prime source of new jobs and play a crucial role in income generation, especially for the poor. However SMEs by the sheer limitation of their size and resources are highly dependant on Business Development Services (BDS) to provide capacity building and support their business growth in areas such as training, advice, information, business planning, marketing, technology, communications and other services. BDS complement credit and micro-finance programmes, and assist small enterprises with growth potential to become medium-sized enterprises.

The situation of Nakawa’s SMEs has not improved greatly because most of them lack enough capital to operate their businesses. Most of these SMEs have limited collateral security to acquire loans from banks yet the creation of the small businesses however require funding for expansion and increase in the level of productivity and growth, this therefore means that creation of micro finance institutions in Nakawa division such as Premier Credit limited, Pride Microfinance among others where people can access small loans or funding to take their businesses to the next level would be the best strategy of expanding these businesses (Georgina, 2001). Thus, need for the study

1.2 Statement of the problem

Credit access by SMEs is considered to be an important factor in increasing their performance. It increases SMEs access to financial support which enables them to overcome their liquidity constraints and undertake some investments such as improvement in business activities thereby leading to an increase in performance of SMEs (UMFI report, 2011).

Despite the increase in the number of microfinance institutions in Uganda, SMEs are charged high interest rates, harsh loan conditions which has limited most of the SMEs’ access to credit (loans), as Kasozi (2017) established that 42% of the SMEs close in their second year of operation due to low profits, failure to expand and inability to meet all their financial obligations. This shows that not much has been done on the SMEs’ performance in Uganda and yet we know that greater access and sustainable flow of financial services particularly credit to SMEs is critical to their growth. It’s in this view, that the study seeks to examine the the role of microfinance services on the performance of small and medium enterprises.

1.3 Purpose of the study

The aim of the study was to investigate the role of microfinance services on the performance of small and medium enterprises in Nakawa Division.

1.4 Specific objectives

The following were the specific objectives of this study;

• (i). To establish the Influence of loan provision on the performance of small and medium enterprises.
• (ii). To examine the effects of advisory services on the performance of small and medium enterprises.
• (iii). To establish the influence of Training on performance of small and medium enterprises.

1.5 Research questions

The study sought to answer the following questions

• (i). What is the Influence of loan provision on the performance of small and medium enterprises?
• (ii). What are the effects of advisory services on the performance of small and medium enterprises?
• (iii). What is the influence of Training on performance of small and medium enterprises?

1.6 Scope of the study

1.6.1 Geographical Scope

The study was carried out in Nakawa Division, Kampala district. The area was chosen because it has a high population, easy accessibility with many small and medium enterprises and microfinance institutions.

1.6.2 Content Scope

The study will establish the effect of micro finance services on the performance of small and medium enterprises in Uganda. More emphasis was put on establishing the financial services SMEs access from microfinance institutions (such as loans, financial literacy, savings and financial transactions), their effect on performance of SMEs (in terms of access to business ideas through workshops, access to mortgages, business motivation and access to capital) and the other factors that lead to the performance of small and medium enterprises in Uganda (other factors include; human capital, market, location and taxes).

1.6.3 Time Scope

The study will consider 2000-2021 as the period of body of knowledge to review literature.

1.7 Significance of the Study

With the study on small and medium development through use of microfinance institutions, the researcher hopes that the study will form a basic material to the following beneficiaries:

The information will be useful for planners and decision makers in different institutions dealing with microfinance program .The findings and recommendations will also be useful to small and medium enterprise managers in determining the usefulness of microfinance towards development and growth of their enterprises.

The academicians will also use the findings of this study to embark on a related study. In other terms, the study findings in this research will act as reference for other future researchers

The researcher will also acquire necessary skills of data collection, interpretation, analysis and discussion and this will help him in carrying out similar research in future and to enable him getting the award of other degrees related to accounting and finance.

1.8 Definition of Terms

Microfinance

Microfinance involves the provision of financial services to clients in the low income segments of the society including, small scale traders, vendors in the streets, farmers and other small scale business people e.g. artisans and producers (Ledgerwood, 1999)

MFI’s

Microfinance institutions are institutions that provide credit services and other financial service to the poor in the form of small loans or savings (Harris, 1994).

According to George (2005), refers to microfinance as the provision of financial services to the low income-households, micro and small enterprises provide an enormous potential to support economic activities of the poor thus contribute to poverty alleviation. Microfinance can also be defined as the practice of providing financial services such as micro credit, micro saving or micro insurance to poor or disadvantaged individuals. By helping them to accumulate usably large sums of money, thus expanding their choice and reducing the risks they face.

Small and medium-sized enterprises

SMEs (sometimes also small and medium enterprises) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

The following chapter elaborates the theoretical review of the research and reviews literature on the study. This presents concepts, opinions and ideas on microfinance services to the performance of small and medium enterprises as they were written by other scholars.

2.1 Theoretical review

The  study  was  guided  by the empowerment   theory  by Cheston  and Kuhn  (2002).The  theory was  based   on  the    Financial   self-sustainability    paradigm   whose     main   consideration in programme   design  is provision  of financially   self-sustainable   microfinance   services  to large numbers   of  people  particularly   micro  and  small  entrepreneurs. The  focus  is  on  setting  of interest   rates   right   to  cover   costs,   to  separate   micro finance   from  other   interventions,    to enhance  separate  accounting,   to expand  programs  so as to capture  economies  of scale  to use group  to decrease  cost of delivery.  Gender  lobbies  argue that targeting  women  on grounds  of high  women  repayment   rate,  it is assumed   that  increasing    access  to microfinance   services will  in itself  lead  to individual   economic   empowerment,   well-being  and  social  and political empowerment(Clerkson,    2006).

The  theory   also  embodies   the  Poverty   alleviation   paradigm:   The  main  considerations    are poverty  reduction  among  the poorest,  increased  well-being  and community  development,   The focus   is  on  small   savings   and  loans,   provision    for  consumption    and  production,    group formation,   etc.  This paradigm   justifies   some level of subsidy   for programs   working with particular   clients   group or in particular   context.   Some programs   have developed   effective methodologies   for poverty targeting and or operating in remote areas through micro financing (Hamson, 2014).

The theory   emphasizes   on joint   liability.   Ghatak   and  Guinnane   (1999)   reviewed   the  key mechanisms    proposed    by  various   theories   through   which   joint   liability   could   improve repayment  rates  and the welfare  of credit  constrained   borrowers.  They  established  that all the theories  have  in  common   the  idea  that joint   liability  can  help  alleviate  the  major  problems facing   lenders   i.e.  screening,   monitoring,    auditing   and  enforcement   by  utilizing   the  local information   and social  capital  that exists  among  borrowers  under  explicit joint  liability,  when one borrower  cannot  repay  a loan, group  members  are contractually   required  to repay instead. Such  repayments   can  be  enforced   through   the  threat  of  common   punishment   typically   the denial  of future credit  to all members  of the defaulting  group or by drawing  on group  savings funds that serves  as collateral.  Second, the perception of joint liability can be implicit.  That  is borrowers   believe  that  if a group  member  defaults,   the whole  group  will  become  ineligible for future loan even if the lending  contract  does not specify  this punishment.

Firm performance   is arguably the most important construct in management   research.  Barney, (2007) refers performance   as how efficiently   and effectively   a firm utilizes its resources in generating economic outcomes.  In the business strategy literature there are two major streams of thought on the determinants   of firm performance.   One is based on factors that exist in the firm’s    external   environment,    and the other   is based   on internal   organizational    factors. Performance   can be determined   in various ways.  It might stand for financial performance, market performance,   customer performance   or overall performance   (Smith et al., 2001).

Most  firms measure  performance   based  on monetary  success  which  is measured  by sales tum over  and  profitability.   Hofstrand   (2009) posit that profitability    is the primary   goal of all business   ventures.   Without   profitability    the business   will   not   survive   in   the long   run. Businesses   who gain profit are destined for success.  The  harsh  environment   however  limits the ability  of SMEs   to constantly  earn these profits  hence  the need  to adjust  to operations  that allow   them  perform   at  a  limited   cost.  The  use  of  micro finance   services   allows  them  to maintain   customer   loyalty  while  expanding   their  niches  hence   improving   their  chances  of sales  tum  over  and profitability.   The firm’s   ability to gain profit is established   after returns are made on investment.   Return on Investment   is important   to firms for continuity   for their ability to return that which was borrowed.  Hofstrand   (2009)  explains  expansion   is subject  to the firm’s  ability  to sustain  itself on initial  capital;  for expansion  businesses  require  to borrow further  and their ability  to return  previously  acts as a guarantee  to the financier.

According   to mwanga(2008),    other  measures  are based  on the market  share  established  in an industry  by these  firms  with  market  leaders  gaining  most  favor  from  the shared  clientele.  A market   share  is  the  percentage   of  an  industry   or  market’s   total  sales  that  is  earned  by  a particular  company  over a specified  time period.  The growth  share matrix  explains  the market share  and market  growth  rate of a firm where  the Boston  Consulting   group  (1970)  analyzes  a firm’s   business   units,  and  their  product.   This  helps  the  company   allocate   resources   and  is used  as an analytical  tool in brand  management,   product  management,   strategic  management, and  portfolio   analysis.  Customer   loyalty is a key contributor   in ensuring success which is a measure of performance   in SMEs.  Loyalty guarantees   sales for certain periods a concept that. has  allowed  firms  major  on  loyalty  schemes   like  in SMEs  in Uganda. The loyalty business model   used  in  strategic   management    in  which   company   resources   are  employed   so  as  to increase   the  loyalty  of  customers   and  other  stakeholders    in  the  expectation   that  corporate objectives   will  be met  or  surpassed.   A typical  example   of  this  type  of  model  is: quality  of product  or  service   leads  to  customer   satisfaction,   which  leads  to  customer   loyalty,   which leads to profitability   (Joseph  2015).Performance   is both  measurable   and perceptive   which  allows  firms  a competitive   advantage over  their  counter  parts  in the industry.  Use of microfinance   services  by SMEs  can enhance their performance   as firms  can easily  have  access  to the necessary  money  to manufacture   all the products  needed  to serve customers’   needs  in the market  ( Hofstrand  ,2009).

Related   Literature    Review

2.2 Loan provision on the performance of small and medium enterprises

Daou et al.  (2014)  said  that  that  there  is  considerable   heterogeneity   in  the  socioeconomic background   of  borrowers   as  well  as  in  the  sources  for  start-up  capital  employed   by  micro enterprises  in Mexico. Moreover, there is clear evidence of liquidity constraints in the market for start-up capital that could hinder the creation and growth of small enterprises.   Daou  et al. (2014)  observed  that the process  of application   for loans  starts  with  small  amounts  and  it is only  after  repayment that the client  can apply  for the next higher  amount.  This process is a limiting factor for those customers who need a large amount right from the beginning.  This  is true because  it takes  an unnecessarily   long  time  for those  seeking  a large  loan  to obtain  enough  funds  to meet  their needs.  In  addition   to  the  time  taken  to  receive  large  loans,  the  clients  also  raised  concerns about the time frame from the receipt  of the .loan to the time of starting  repayment,  which  was just  one week after the disbursement   of funds .in most  cases.

Ofori  et al. (2014)  analyzed  the  impact  of microfinance   loans  on productivity   and growth  in Ghana and highlighted  that the clients  put the MFI loans  to good use and clients with a higher number  and a higher  average  size  of MFI  loans  were  found  to have  higher  growth  rates  than other  enterprises. Kisaka  and  Mwewa  (2014)  concur  that  SMEs  make  significant   growth  after  accessing  loans and  recommend   that  other  SMEs  should  follow  suit,  if the  country  is to achieve  its vision 2030.  Lack  of  finance   is  one  of  the  main   reasons   for  SMEs   poor  performance    in  most developing  countries  (Terungwa,2012).

Cooper   (2012)   established   that SMEs   largely   depend   on micro   financing   for growth.   A significant percentage   of SMEs were found to seek and have access to micro credit for their businesses.    The   researcher also   established     that   microfinance     services    have   assisted enterprises   to change  their status  through  growth  in sales  level  from micro  to small  and  from small  to medium.

Access to credit enabled the SMEs to cover some or all of the cost of capital, expansion,   or renovation of buildings.  Though  SMEs  have  easy access  to micro  finance  services,  the study indicated   that  they  have  no  exemption   from  strict  requirements   when  applying   for  loans. UWFT  (2010)  found  that majority  of SMEs  that accessed  adequate  funds  from micro finance institutions  increased  their volume  of sales and consequently,   the profits.  SMEs also acquired assets using MFls loans (UWFT, 2010).

According   to  UNDP  report  (2012),   SMEs  in  Kenya  were  able  to  acquire   fixed  assets  and technologies   using  MFls.  This revealed a positive significant relationship   between amount of loan and SMEs’ achievement   of goals.  Wanambisi   and  Bwisa   (2013)   argue  that  inadequacy   of  capital   hinders   the  expansion   of businesses.   Larger loans enable SMEs to graduate to medium enterprises.   Osoro  and Muturi (2013)  also support  this argument  and concur  that those  SMEs  that receive  large loans,  most often have a larger labour  force than those  SMEs  that received  smaller  loans. Kairaria  (2014)  agrees  that  most  SMEs  borrow  investment   capital,  with  few  inheriting  their businesses   from  their  parents   or  guardians.   He  argued  that  loan  had  the  largest  significant effect  on the  financial  performance   of micro  and  small  enterprises   with  a beta  coefficient  of  0.30Q, followed  by savings  mobilization   with  a beta  coefficient   of 0.210  and  training  having the least but significant  effect  with a beta coefficient  of 0.048.

Provision   of  micro finance   to  the  youths   to  engage   in  micro   and  small   enterprises   will therefore   spur  economic   development    and  keep   our  Kenyan   youth   busy,   thus  avoiding disasters  like what  the  country  experienced   in the post-election   violence  in 2008.  Sifunjo  et al. (2014)  indicate  that the objective  of every  micro-entrepreneur    is to grow  their businesses into large   enterprises.    To   achieve   this,   most   of the   micro-entrepreneurs     make   use   of microfinance services and training to improve their productivity   and profitability.   The results of   the   study   showed    that   micro-credit,     micro-savings     and   training,   jointly    contribute positively   to SMEs growth.   Lack  of  access   to  credit  is  a  major   constraint   inhibiting   the growth  of the SMEs sector  (Sifunjo  et aI, 2014).

The World Bank report (2013) also agrees with these sentiments.   The  issues  and problems limiting   SMEs  access  to  financial   services   include   lack  of  tangible   security,   coupled  with inappropriate legal  and  regulatory   framework   that  does  not  recognize   innovative   strategies for lending  to SMEs.  Limited  access  to formal  finance  due  to poor  and  insufficient   capacity to deliver  financial  services  to SMEs  continues  to be a constraint  in the sector’s  growth.

Formal financial institutions   perceived savers as high risk and commercially   unviable.   As a result, only a few SMEs accessed   credit from formal financial   institutions   in the country. Mwangi   et al. (2013) reckoned   that inadequacies   in access to finance are key obstacles   to SMEs   growth.   Mwobobia   (2012))   also agrees positive   and significant   relationships    exist between MFls loans and SMEs performance.

MFIs around the world follow a variety of different methodologies for the provision of financial Services to low-income clients (Robinson, 1998). These methodologies are overwhelmingly based on the principle of financial services being related to the cash flows of the low-income client groups and thus aim to facilitate relatively frequent and very small or micro-loan and savings transactions (Ronge, 2002). Various attempts have been done to examine the effect of financing SMEs by microfinance Institutions on performance of SMEs. Maina (2012) did a survey on microfinance services contribution to entrepreneurial development in Uganda.

Management of SMEs is a likely intervention that microfinance institutions are expected to offer in a bid to provide solution to many inadequacies that SMEs face. According to (Armyx, 2005), it is generally recognized that SMEs (Small and Medium Enterprises) face unique challenges, which affect their growth and profitability and hence, diminish their ability to contribute effectively to sustainable development. Among such challenges as highlighted by Wanjohi (2007) is lack of managerial training and experience. Wanjohi noted that a typical owner or managers of small businesses develop their own approach to management, through a process of trial and error. A consequence of poor managerial ability is that SME owners are ill prepared to face changes in the business environment and to plan appropriate changes in technology. Majority of those who run SMEs are ordinary lot whose educational background is lacking. Hence they may not well equipped to carry out managerial routines for their enterprises (King and McGrath 2002). According to Mugure (2008) some educational institutions have made attempts to incorporate managerial training among SMEs. There is however little known about how MFIs are imparting business management skills among SMEs and how this has affected their performance.

2.3 Advisory services on the performance of small and medium enterprises.

Lack of sufficient market information poses a great challenge to small enterprises. Despite the vast amount of trade-related information available and the possibility of accessing national and international databases, many small enterprises continue to rely heavily on private or even physical contacts for market related information. This is due to inability to interpret the statistical data (Mwangi, 2012) and poor connectivity especially in rural areas. Since there is vast amount of information and only lack of statistical knowledge to interpret and Internet connectivity, small enterprises entrepreneurs need to be supported

A consequence of poor managerial ability is that small and medium enterprises owners are not well prepared to face changes in technology, majority of those who run SSEs are ordinary lot whose educational background is lacking. Hence they may not be well equipped to carry out managerial routines for their enterprise (McGrath, 2002). According to Orwa (1995) people venture into business without proper planning and sometimes for wrong motives i.e. lure for big money. As much as they anticipate making money, it is good to have objectives in place. This will help the organization to realize its purpose and this will act as a guide line of the firm’s relations to its workers, associates, clients, government, lenders etc. He also added that to be effective the owner or manager needs to have a good understanding of different style of leadership.

Mwangi (2013) suggest that microfinance institutions can provide a link to between client and SMEs through formation of business clubs, marketing associations and practicing development of well update data bases on SMEs information, their products and services. However, little has been discussed on how enhanced SMEs network and accessibility of market information provided by MFIs have contributed towards performance of SMEs.

According to Perpin Strup (1960), there are also special loans to finance the purchase of agricultural machinery such as tractors, harvesters at microfinance institutions. Lwakatare (2004) has also stated that at microfinance institutions construction of biogas plants and irrigation systems as well as the purchase of agricultural land may also be financed through special types of agricultural finance.

Furthermore, SMEs are believed to be behind innovation in the economy and can cause reduction in prices of goods through competition and new improved products are more frequently introduced; consequently leading to the provision of better services for their customers (Lisa, 2009). In this regard, SMEs diversify the product base of the economy and gives room for competition and removing monopolistic tendencies, leading to reduction in prices and service quality provision. This study seeks to identify whether the above merits of small and medium enterprises have been brought by access to services from MFIs.

It is believed that SMEs serve as training grounds for developing the skills of industrialized workers and entrepreneurs (Lisa, 2009). The low cost of setting up a firm enables an enterprising worker not only to provide himself a livelihood but also offer employment to others. SMEs are said to employ relatively more unskilled and semi-skilled workers and training is mainly given on-the job in the premises itself. SME proprietors often do not have the time or the personnel to engage in formal training. For the newly-initiated entrepreneur, the setting up of a small establishment enables him to put his skills and knowledge into practice and enables him to acquire further experience and to improve his ability gradually with the growth of the business (the practice makes man perfect concept).

Chijoriga (2010) revealed that there are limits to the use of credit as an instrument for poverty eradication, including difficulties in identifying the poor and targeting credit to reach the poorest of the poor. Added to this is the fact that many people, especially the poorest of the poor, are usually not in a position to undertake an economic activity, partly because they lack business skills and even the motivation for business. Chijoriga (2000), furthermore noted that it is not clear if the extent to which micro credit has spread, or can potentially spread, can make a major dent in global poverty. The actual use of this kind of lending, so far at least, is rather modest: the overall portfolio of the World Bank, for example, is only $218 million. In recent international meetings, it has been stated that a target to reach 100 million families by the year 2005 would require an additional annual outlay of about $2.5 billion. This should be compared to the total Gross Domestic Product (GDP) of all developing countries, which is now about $6 trillion. A certain sense of proportion regarding micro credit would seem to be in order. The above study did not stipulate how eradication of poverty led to the growth of small and medium enterprises, this study tried to close this gap by assessing the effect of microfinance services on the growth of small and medium enterprises in Nakawa division.

Microfinance institutions mobilize rural savings and have simple and straight forward procedures that originate from local cultures and are easily understood by the ‘population (Germidis et.al 2001).

2.4 Influence of Training on performance of small and medium enterprises

According to Daniels (2004), these enterprises have been recognized as the engines through which the growth objectives of developing countries can be achieved. They are potential sources of employment and income in many developing countries and estimated that SMEs employ 22 % of the adult population in developing countries. SMEs are said to have a favourable effect on income distribution in those new entrepreneurs with limited financial resources and according to Lisa (2009), technical skills can gain entry into the industrial sector through small industry operations. In this way SMEs have the effect of creating a new class of people, leading to the expansion of the middle class and a wider distribution of income. SMEs can survive in rural parts of the country because of their location flexibility, their lower requirement of technology and infrastructure, their nature to serve small geographic markets, and their firm commitment to local development goes a long way to contribute immensely to job creating and rural development efforts.

Storey   (2013)   argues   that training   services   on business   skills   enhance   performance.  The author further indicate that most  important   factors  of business  success  among  entrepreneurs   were:  a successful   record   of  previous   work   history;   strong   analytical   skills   acquired   in  a  broad humanistic    education; early   investment    in  personal    reputation    and   broad   biographical experience    outside   the   narrow    field   of   the   profession;    early   socialization    experiences functioning   as  biographical   resources   in  the  discovery   of  successful   business   ideas;  and  a training   on  how  to  communicate   effectively   with  customers   in  an  increasingly   global  and knowledge   – based  economy.

Kisaka   and  Mwewa   (2014)   established   that  Small  and  Medium   Enterprise   Development Authority   (SMEDA)   organizes   training  programs,   seminars,   workshops   and  conferences   of short  duration  in major  cities  across  the  country  for raising  awareness   and capacity  building of  SMEs.  These need based training   programs   are affordable,   appropriate   and innovative. These programs are aimed at improving knowledge,   skills and competencies   in the technical, marketing,   financial,   compliance,   regulatory,   legal and commercial   functions.  They help to improve major performance indicators such as productivity, quality,   competitiveness    and sustainability.

The  training  thus  aids improvement   in areas  such  as export  potential,   investment  promotion, business  transparency,   human  resource  development,   managerial   capacity  building  etc. These programs   help decreasing   the level of SME mortality   and increasing   efficiency.   Osoro  and Muturi  (2014)  agree  that  training  offered  by DTMs  to SMEs  is important  for the successful performance   of  these  enterprises.  Management competence encompasses fictional knowledge,     management     skills   and managerial   behavior.   Thus, training   of competencies    such as marketing,   financial   control and networking   among others (Kisaka&Mwewa,    2014).  Njoroge   et al. (2013)  recon  that  the quality  of goods  and services  produced   without  training  is much  lower  than those  produced where  there  is training.  Other  than the lack 0 f relevant  or sufficient  skills,  however,  this can also  be  attributed   to  desire  to maintain   unreasonably   low-costs   and  the  use  of  low  quality materials.

According to Moustafa (1990), asserted that effective choice is based on pre-selected criteria for a technology’s meeting specified. Further, it also depends on the ability to identify and recognize opportunities in different technologies. The expected outcome is that the firm will select the most suitable or “appropriate” technology (AT) in its circumstances. According to Groebner (2008) an enabling environment is an opportunity that should be utilized by all business operators in Kenya. With changing governments, which come with promises of a better tomorrow and definition of new business policies, reconstruction of the economy, improvement of the infrastructures and security, small business are expected to do well. Sometimes changes in political environment, often lead to changes in legal environment and the manner in which current laws are enforced. It is hard for business operators to know all the relevant laws but it is of essence that they do so because the legal environment sets basics rules on how business should operate. The legal environment may severely limit some choices when the law changes. The researcher seeks to assess the kinds of business environment that small and medium enterprises operate and how the of business environments have affected their performance in terms of profitability, market share, geographical coverage, outreach and others.

Armyx (2005) noted that well-conceived regulation can encourage competition and ensure fair market. He further added that the government should develop public policies to guide this sub-sector, set laws and regulations that limit them from exploiting the society. Competition is necessary in business but sometimes it may be unfair. It is of importance that all the stakeholders are given full information about what is expected of them, than coming up with policies that cannot be implemented. The researcher noticed that small and medium enterprises operate under stiff competitions from similar companies as they produce or sell similar products, this study will determine how the competition they face affects their performance.

2.5 Performance of SMEs

The history of competition in Business can be traced from the earliest business dates between 2400 and 2800 B.C for 50 jars of fragrant smooth oil for 600 small weights in grain written on a red clay tablet found in Syria (Coe, 1989, p. 87). Also another evidence of historical competition in Business includes the development of the silk trade between China and a Greek colony in 800 B.C. Furthermore, in the United States, according to Page (1980), competition in Business is a common issue and intense competition in Business started in the industrial revolution between mainly railroad companies at the time (Koske, Wanner, Bitetti, & Barbiero, 2015).

The complexity and volume of competition in Business drastically increased globally in the recent years. Some of the causes that can be attributed to this include globalization, out sourcing, intense competition for existing markets as well as complicated and numerous partnership. Over the last fifty years many, of the world’s largest firms have advanced from being simple manufactures of hard goods, or providers of basic services, to being sophisticated vendors using advanced business models. This means that commitment of customers and suppliers to contractual obligations has increased, thus, the need for sustainable competition polices (Cusumano, Gawer, & Yoffie, (2019).

Film performance   is arguably the most important construct in management   research.  Barney, (2007)  Most  firms measure  performance   based  on monetary  success  which  is measured  by sales tum over  and  profitability.   Hofstrand   (2009) posit that profitability    is the primary   goal of all business   ventures.   Without   profitability    the business   will   not   survive   in   the long   run. Businesses   who gain profit are destined for success.  The  harsh  environment   however  limits the ability  of SMEs   to constantly  earn these profits  hence  the need  to adjust  to operations  that allow   them  perform   at  a  limited   cost.  The  use  of  micro finance   services   allows  them  to maintain   customer   loyalty  while  expanding   their  niches  hence   improving   their  chances  of sales  tum  over  and profitability.   The firm’s   ability to gain profit is established   after returns are made on investment.   Return on Investment   is important   to firms for continuity   for their ability to return that which was borrowed.  Hofstrand   (2009)  explains  expansion   is subject  to the firm’s  ability  to sustain  itself on initial  capital;  for expansion  businesses  require  to borrow further  and their ability  to return  previously  acts as a guarantee  to the financier.

According   to mwanga(2008),    other  measures  are based  on the market  share  established  in an industry  by these  firms  with  market  leaders  gaining  most  favor  from  the shared  clientele.  A market   share  is  the  percentage   of  an  industry   or  market’s   total  sales  that  is  earned  by  a particular  company  over a specified  time period.  The growth  share matrix  explains  the market share  and market  growth  rate of a firm where  the Boston  Consulting group  (1970)  analyzes  a firm’s   business   units,  and  their  product.   This  helps  the  company   allocate   resources   and  is used  as an analytical  tool in brand  management,   product  management,   strategic  management, and  portfolio   analysis.  Customer   loyalty is a key contributor   in ensuring success which is a measure of performance   in SMEs.  Loyalty guarantees   sales for certain periods a concept that. has  allowed  firms  major  on  loyalty  schemes   like  in SMEs  in Uganda.  The  loyalty  business model   used  in  strategic   management    in  which   company   resources   are  employed   so  as  to increase   the  loyalty  of  customers   and  other  stakeholders    in  the  expectation   that  corporate objectives   will  be met  or  surpassed.   A typical  example   of  this  type  of  model  is: quality  of product  or  service   leads  to  customer   satisfaction,   which  leads  to  customer   loyalty,   which leads to profitability   (Joseph  2015). Performance   is both measurable   and perceptive   which allows firms a competitive   advantage over their counter parts in the industry.  Use of microfinance   services  by SMEs  can enhance their performance   as firms  can easily  have  access  to the necessary  money  to manufacture   all the products  needed  to serve customers’   needs  in the market  ( Hofstrand  ,2009).

2.6 Conceptual frame work

Figure 1: Conceptual Framework

Independent Variable                                                                       Dependent Variable

Source: Kisaka   and  Mwewa   (2014)

The above conceptual frame work describes the relationship between the independent variable and the dependent variable. The frame work further presents the intervening factors that can also effect or determine the dependent variable.

The performance of microfinance services is the independent variable and this involves factors such as provision of loans, the interest rates, advisory services and training to people to enable to effectively use these funds. The services provided by the microfinance institutions determine the performance of small enterprises. This therefore means that the growth of the small enterprises depend on the services delivered by microfinance institutions and the growth is expressed in terms of size of the enterprise, level of profits, efficiency and increase in the level of productivity.

According to the frame work, the small enterprise is not only effected on by the services of microfinance institution but also effected on by other factors such as the government factors like taxation and economic factors which are essential determinants of the success of activities.

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter outlines the methods that was adopted in order to answer the research questions detailed in chapter one. It looks at the research design, research population, sampling techniques, data collection instruments and procedure of data collection, mode of data analysis and presentation as well as ethical consideration and limitations of the study.

3.1 Research design.

The research was a descriptive cross sectional survey design where data will be collected from a cross the population at one point in time. This design is cheap, less time consuming and easy data collection and analysis (Amin 2005). Both qualitative and quantitative data collection approaches will be used in this study.

3.2 Research Population.

The target population of this study consisted of respondents having small and medium enterprises and those working in the microfinance enterprises in Nakawa Division.

3.3 Sample size

Slovene’s formula was  used to compute the sample size. This formula will be employed so as to sample fairly a large size as representation of the total population such that the research findings obtained can be considered valid. The details on the determination of sample size using Slovene’s formula are shown below;

n =

n = Sample size

N = Population size

e = level of significance (0.05)

n =

n = 40

Table 3.1: Sample size

3.4 Sampling procedures

This study will be use a technic of stratified random sampling. The respondents of this study will be divided into two categories 35 work in Small and medium enterprises and 20 work in microfinance institutions

3.5 Source of data

Majorly, two types of data sources – primary and secondary will be used for this study

3.5.1 Primary data

Primary data will be collected using questionnaires. The study will adopt a quantitative methods to obtain data on the topic under study. Quantitative methods will be used to generate quantifiable data, using a questionnaire, which will be the main instrument used because of its convenience and efficiency in data collection. The different tools and data sources to be used to make triangulation feasible (Amin 2005)

3.5.2 Secondary data sources

Secondary sources of data that will be reviewed will include scholarly books, magazines, dissertations journals and articles. This source will be useful in collecting data from already written literature for example e-books, journals, published articles and periodicals as part of literature review (Mubazi, 2008).

3.6 Research Instruments

This study will use questionnaires. This will be because of the nature of data to be collected, the time available, as well as by the objectives of the study. The overall aim of this study is to evaluate the role of microfinance services on growth of small enterprises in Nakawa Division. The researcher will be concerned with views, option, perception and feelings from the environment. Such information will be collected through the questionnaires, interviews because the study will be conversed with variable that cannot be directly observed. The sample size will also be quite large, and given the time constraints and target population is literate and unlikely to have difficulties in responding to questionnaire items, questionnaire is ideal tool for collecting data.

3.6.1 Questionnaires

A self-administered and closed ended questionnaire will be used so as to save time and enable respondents to give relevant choice since different options was given. This method of data collection is preferred for this study because it gives freedom to respondents to give their truthful opinions since there was no one to challenge their answers as it is in the case of interviews. This gives complete confidence to respondents to effectively answer questions asked without feeling shy or being scared.

3.7 Validity and Reliability of the instruments

Instruments are supposed to measure accurately what they are supposed to measure. Therefore, before the instrument is administered, the questionnaire will first be examined by the researcher. This will be scrutinized by the supervisor as this will ensure that the terms used in the questionnaire and interview guides are precisely defined and properly understood.

In this study, the pretest method will be used to establish reliability. The tools of data collection will be pilot tested twice on different occasions to the same population by different data collectors.

3.8 Data Analysis

After collecting and cleaning the data it will be entered in a computer using Ms-excel. The quantitative data will be analyzed using descriptive statistics, which includes frequencies and percentages. The qualitative data will be analyzed in the content analysis and the analyzed data will be presented using tables and figures in form a report.

3.9 Ethical considerations

The researcher will first get an official introductory letter from Department of Business which will help her to collect data upon seeking respondents’ consent and assure them of confidentiality and private treatment of their information; and report the true findings of the study without any bias.

3.10 Limitations of the study.

The researcher may be affected by the following challenges during the study.

The study will be faced with the problem of not finding all respondents in the study area especially the employees who go to the field as a group.

CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF FINDINGS

4.0 Introduction

This chapter consists of the presentation, discussion and analysis of the findings from the study. It provides results which were analyzed from raw data collected in the field. It is in two categories; the first one represents the demographic characteristics of the respondents while the other category represents the responses of the questions that were asked concerning research objectives. The analysis was done and data is represented in form of tables, graphs and pie-charts.

4.1 Overview of the Study

The study was carried out at Nakawa Division among the vendors of Nakawa market. Questionnaires and interview guides were designed to obtain data from a sample size of 40 was selected, and the findings of the study were presented in accordance to the study objectives.

4.1.1 Response Rate

A sample of 20 respondents was selected using purposive sampling methods. Questionnaires, and interview guides were administered to them for data collection. Among the 40 respondents, all of them returned the questionnaires, giving a response rate of 100%.

4.2 Demographic Characteristics of the Respondents

The background characteristics compiled show the gender, age, the education level and period of work. This data was analyzed and is presented below;

Figure 1: Showing gender of the respondents

Source: Primary Data

From figure 4.1 above, it’s indicated, majority of respondents (53%) were males and the females were only 47% of the total respondents. This implies that men were found to be active in the study under investigation. However, both ideas were relevant for the study. This indicates that the Nakawa market vendors were both males than females.

Table 4.2: Age of Respondents

Source: Primary Data

Table 4.1 shows that, the majority (40%) of the respondents were predominantly between the ages of 31 and 40 years. A significant percentage (25%) of the respondents was in the age bracket of 41 and 50years. The remaining 20% of the respondents were in the age bracket of 18 and 30years and another 15% of them were in the age group of 50 and above. 31-40years had the highest number because these are the most active age group hence they are actively involved in the market, therefore they had rich experiences and could also appreciate the importance of the study.

The table above shows that most of the interviewed respondents (55%) were of degree holders, 30% were of Certificate/Diploma and only 15% of the study respondents were of A’ level while none of the respondents had a postgraduate nor of O’ level therefore, provided information based on the academic knowledge, skills and experience they have gain in management. This shows that Nakawa Market vendors are knowledgeable and therefore their responses could be relied on.

Findings in table above, it was revealed that majority (45%) of respondents have worked at Nakawa Market between 4years and above, followed by 1-3 years  with 30% and less than 1year with (25%). This implies that the majority of the employees are experienced in the activities of the Nakawa Market and they therefore thy good knowledge on Microfinance institutions

4.2 Influence of loan provision on the performance of small and medium enterprises.

This was presented in the table below;  The results were obtained and are presented below;

Table 4.3: Influence of loan provision on the performance of small and medium enterprises.

Table above reveals that the SMEs do not easily have access to startup capital, this is indicted by the fact that majority 47% of the respondents strongly disagreed, this view was also indicated by the fact that only 10% strongly agreed with the statement. From the above findings it is therefore evident that SMEs in Nakawa Division face a challenge of accessing capital.

In relation to the study findings it was revealed that majority 50% indicated strongly disagreed that top up micro finance can easily be obtained by SMEs, while 25% also disagreed this findings was also indicates that the ability by SMEs in Nakawa Division to obtain loans in Nakawa is very minimal.

The findings in the study further shows that majority of the respondents strongly disagreed with the findings that SMEs use the loans from MFIs for business expansion only. This findings further indicated that there are other costs that affect the business of SMEs and therefore sometimes SMEs get loans to finance other projects unrelated to business expansion.

According to the table results shows that majority 60% of the respondents strongly disagreed with the statement that Financing from MFIs can easily be obtained by SMEs. This study results was also further shows that accessing capital by SMEs in Nakawa division is not easy as there are many procedures to be followed.

Study results shows that majority 62.5% of the respondents disagreed with the statement that the time taken by SMEs in getting loan approval is low. This further indicate that SMEs accessing loans takes a lot of time and this affects the business of the SMEs.

The findings in the study indicates that majority 62.5% of the respondents indicated that the requirements for loan approval is within the achievable limits of SMEs. This study results further indicates the requirements for loan approval is with in achievable terms.

The findings in the study further shows that majority disagreed with the statement that there are different loan products by MFIs so SMEs have a lot of variety to choose from. This findings therefore shows that MFIs have few loan products for the people.

From the table above the results have revealed that the payment terms do not promote the growth of the Business. This is indicated by the fact that majority of the respondents strongly disagreed with the statement and only none of the respondents agreed with the statement.

4.3 Effects of advisory services on the performance of small and medium enterprises.

Table 4.6: shows effects of advisory services on the performance of small and medium enterprises.

Source: Primary Data

Table above indicates that majority of the respondents disagreed with the statement that SMEs receive market information from MFIs. This therefore means that Mfs institution do not provide market information to the SMEs this was further indicated by the fact that none of the respondents agreed.

The study results further shows that most of the respondents disagreed with the statement that SMEs receive managerial information from MFIs that helps them in advancement, this findings also further shows that MFIs do not provide managerial information to SMEs in Nakawa division.

Table results above shows that majority of the respondents agreed that MFIs provide a link between MFIs and clients. This therefore indicated as a result of MFIs some of the SMEs are able to get potential clients who enable in the growth of the Business.

Table results further shows that most of the respondents disagreed that Technical advice is always given to SMEs from MFIs. This study results therefore indicates that MFIs do not always give technical advice to SMEs. From the above results therefore indicates that apart from provision of loans to SMEs technical advice is not got from SMEs.

According to the findings in the study it is evident that majority of the respondents indicated that MFIs encourage innovation from SMEs and they finance it, this was due to the act that More than 60% of the respondents strongly agreed.

According to the findings of the study Financial management advice is given to SMEs from MFIs, this indicates that people Microfinance institution provide to SMEs the ability. The study results therefore shows.

According to the study results, majority of the respondents indicated that, there is always seminar organized by MFIs for SMEs. This indicated that most of the respondents agreed to the fact that MFIs institution organize findings for the study.

According to the findings in the study, majority of the respondents stated that SMEs do not receive Advice from MFI on how to manage cash flow is something that is always not told to SMEs by MFIs. How some of the respondents also acknowledged they receive advice from MFIs.

4.2.2             Training on the performance of small and medium enterprises.

Table 4.7: Shows Training on the performance of small and medium enterprises

Source : primary data

According to the findings in the study majority of the respondents strongly disagreed that SMEs are trained on business skills SMEs are trained on business skills. This study results therefore indicates that SMEs do not get the training on Business skills.

The study results indicates that majority of the respondents disagreed with the findings that SMEs are trained on Technical skills by MFIs. This view also further shows that SMEs are not specifically trained on technical skills

The study results also further shows that MFIs normally organize workshops and seminars for training purposes of SMEs. This view further shows that MFIs organize workshops for the SMEs in Nakawa division to understand their financial products.

According to the study results most of the respondents disagreed with the findings that MFIs Train SMEs on quality and improvements. This study results therefore indicates that during the workshops the SMEs train SMEs on quality Improvement.

In line with the study results it is evident that SMEs do not receive Advice on how to manage cash flow is something that is always told to SMEs by MFIs. This view therefore shows that SMEs do not receive advice on how to manage cash flow.

CHAPTER FIVE

DISCUSSION, RECOMMANDATIONS AND CONCLUSIONS OF THE STUDY

5.1 DISCUSSION

This section presents the discussion of the study in line to the study objectives; to establish the Influence of loan provision on the performance of small and medium enterprises, to examine the effects of advisory services on the performance of small and medium enterprises and to establish the influence of Training on performance of small and medium enterprises.

5.1.1 To establish the Influence of loan provision on the performance of small and medium enterprises

The study indicates that SMEs do not easily have access to startup capital, this view was also further stated by Daou  et al. (2014)  who  observed  that the process  of application   for loans  starts  with  small  amounts  and  it is only  after  repayment that the client  can apply  for the next higher  amount.  This process is a limiting factor for those customers who need a large amount right from the beginning. This factor therefore further indicates that SMEs do not easily get access t capital.

The findings further indicated that majority of the respondents indicated that top up micro finance cannot  easily be obtained by SMEs, this was also further indicated by Daou  et al. (2014)  , who observes that the process of obtaining microfinance loans takes time and process for SMEs and therefore Top loans is not something that can easily be got by SMEs.

The findings in the study further shows that majority of the respondents strongly agreed with the findings that SMEs use the loans from MFIs for business expansion only. This findings further indicated that there are other costs that affect the business of SMEs and therefore sometimes SMEs get loans to finance other projects but  business expansion is at the core, this view was also further elaborated by Cooper   (2012)  who  established   that SMEs   largely   depend   on micro   financing   for growth.   A significant percentage   of SMEs were found to seek and have access to micro credit for their businesses.

The findings in the study further shows that that majority of the respondents strongly disagreed with the statement that Financing from MFIs can easily be obtained by SMEs. This study results was also further shows that accessing capital by SMEs in Nakawa division is not easy as there are many procedures to be followed, this was also in line with the views of Daou  et al. (2014)  who indicates that Obtaining of financing by SMEs is often difficult sine MFIs loans takes steps to achieve them.

The findings in the study indicates that majority of the respondents indicated that the requirements for loan approval is within the achievable limits of SMEs. This study results further indicates the requirements for loan approval is with in achievable terms this was also in line with Osoro  and Muturi (2013)  also support  this argument  and concur  that those  SMEs  that receive  large loans,  most often have a larger labour  force than those  SMEs  that received  smaller  loans and the terms of achieving loans is based on the size of SME.

Majority disagreed with the statement that there are different loan products by MFIs so SMEs have a lot of variety to choose from. This findings therefore shows that MFIs have few loan products for the people and the results further indicated that the payment terms do not promote the growth of the Business. This is indicated by the fact that majority of the respondents strongly disagreed with the statement and only none of the respondents agreed with the statement, this was because SMEs charge high interest rates that most of the Financial institutions feel it takes away their profits.

5.1.2 Shows effects of advisory services on the performance of small and medium enterprises.

Majority of the respondents disagreed with the statement that SMEs receive market information from MFIs. This therefore means that Mfs institution do not provide market information to the SMEs this was further indicated by the fact that none of the respondents agreed, This was also stated by  Mwangi, (2012) who indicated that lack of sufficient market information poses a great challenge to small enterprises. Despite the vast amount of trade-related information available and the possibility of accessing national and international databases, many small enterprises continue to rely heavily on private or even physical contacts for market related information.

The study results further shows that the that SMEs donot receive managerial information from MFIs that helps them in advancement, this findings also further shows that MFIs do not provide managerial information , this was also further elaborated by Mwangi, (2012) who stated that lack of managerial information has been detrimental for SMEs.

In the study it has been revealed that  MFIs provide a link between MFIs and clients. This therefore indicated as a result of MFIs some of the SMEs are able to get potential clients who enable in the growth of the Business. this therefore indicates that MFIs organizations provides a platform through which both MFIs can meet and discuss.

Table results further shows that most of the respondents disagreed that Technical advice is always given to SMEs from MFIs. This study results therefore indicates that MFIs do not always give technical advice to SMEs. From the above results therefore indicates that apart from provision of loans to SMEs technical advice is not got from SMEs, this view contradicts with Storey   (2013)   who argues   that training   services   on business   skills   enhance   performance.

According to the findings in the study it is evident that majority of the respondents indicated that MFIs encourage innovation from SMEs and they finance it, this view therefore indicted that MFIs  provide finance for SMEs to start up their Business, the study findings furthet indicated that Financial management advice is given to SMEs from MFIs, this indicates that people Microfinance institution provide to SMEs the ability, this ws also in line with Chijoriga (2010) who revealed that there are limits to the use of credit as an instrument for poverty eradication, including difficulties in identifying the poor and targeting credit to reach the poorest of the poor and therefore MFIs must provide both finance and advice to the SMEs to ensure that they make good decisions, some of the training provided by MFIs to SMEs is iform f seminars.

5.1.3 Training on the performance of small and medium enterprises.

According to the findings in the study majority of the respondents strongly disagreed that SMEs are trained on business skills SMEs are trained on business skills. This study results therefore indicates that SMEs do not get the training on Business skills, this is also in line with Koske, et al., , (2015), who indicated that skills in managing Business is one of the main challenge facing SMEs in the modern world.

The study results indicates that majority of the respondents disagreed with the findings that SMEs are trained on Technical skills by MFIs. This view also further shows that SMEs are not specifically trained on technical skills. The resuts indicates that smeS ARE lacking in tehnical skills as further elaborated by Sifunjo  et al. (2014) who indicates that provision   of  micro finance   to  the  youths   to  engage   in  micro   and  small   enterprises   will therefore   spur  economic   development    an apart from finance youths also need to be trained in technical skills.

The study results also further shows that MFIs normally organize workshops and seminars for training purposes of SMEs. This view further shows that MFIs organize workshops for the SMEs in Nakawa division to understand their financial products, this view was also further indicated by Sifunjo  et al. (2014) who also further indicted that seminars ad worskhops provide an opportunity for SMEs to learn new trends in the Business.

According to the study results most of the respondents disagreed with the findings that MFIs Train SMEs on quality and improvements. This study results therefore indicates that during the workshops the SMEs train SMEs on quality Improvement and In line with the study results it is evident that SMEs do not receive Advice on how to manage cash flow is something that is always told to SMEs by MFIs. This view therefore shows that SMEs do not receive advice on how to manage cash flow.

5.2 Conclusion

The study made the following recommendations;

The study indicated that loan acquisition in MFIs takes a long process and time and this affects the SMEs performance.

The study also further noticed that MFIs do not provide training opportunities to SMEs something that is crucial to ensure continuous success of the MFIs as this could reduce on loan defaults.

The study also concludes further that MFIs give loans according to the SMEs something that prevents SMEs from growing and therefore this in turn affects the performance of SMEs.

SMEs also

5.3 Recommendations

The study made the following recommendations;

MFIs need to provide training opportunities to SMEs so as they get better knowledge in managing their Business.

MFIs need to reduce on the conditions to SMEs so as they can easily acquire capital need for the loans,

MFIs need also to offer advice to SMEs in order to ensure profitability and growth other business.

QUESTIONNAIRE

TOPIC: THE ROLE OF MICROFINANCE SERVICES ON THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES

A CASE STUDY: A CASE STUDY OF NAKAWA DIVISION

Dear respondent;

I am NASSAKU SYLVIA a student of Nkumba University; pursuing Bachelor and carrying out a study on the above stated topic. You are one of the respondents randomly selected to participate in the study. The information given shall be treated with at most confidentiality and shall only be used strictly for academic purpose. Your response to the following questions will be highly appreciated and supported by utmost gratefulness.

SECTION A:             GENERAL DATA

• Sex: Male                    Female

• Age a) 18 -29 b) 30 – 39 c)  40 and above

3. Educational level

Master’s degree                       1^st degree                     Diploma                           others

• For how long have you been operating business at Nakawa Division?

Less than two years                                   3-5 years

6-10 years                                                  10 above

SECTION B: Influence of loan provision on the performance of small and medium enterprises

SA=strongly agree, A=agree, N=neutral, D=disagree, SD=strongly disagree

SECTION C: Advisory services on the performance of small and medium enterprises.

Key: SA=strongly agree, A=agree, N=neutral, D=disagree, SD=strongly disagree

Please tick one appropriate.

Please mention other types of advice received from MFIs.

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….

SECTION D: Training on the performance of small and medium enterprises

Key: SA= strongly agree, A=agree, N=neutral, D=disagree, SD=strongly disagree

Please tick one appropriate.

THANK YOU FOR YOUR RESPONSES

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