ABSTRACT

The purpose of the study’ was to determine the effrct of micro/mnance institution services on

the performance of small and medium enterprises and the spec~lc objectives of the study

were; to examine effect of microfinance loan services on the performance of small and

medium enterprises in Uganda, to determine the effect of microfinance investment training

services on the performance of SMEs in Mukura sub county and to establish the effect of

microjinance saving services on the performance of SMEs in Mukura Sub county. A cross

section survey design was used and data was collected from 50 respondents. The findings of

the study revealed that loan services enhance the performance of small and medium

enterprises as respondents agreed to most of the statements that were used to measure this

objective except that it was revealed that the interest charged on loans is not Jiworable and

also that the collateral security is a problem in obtaining the loan. The findings of the study

also revealed that training services improve the performance of small and medium

enterprises as respondents agreed to all the statements that were used to measure this

objective of the study. The findings of the study further revealed that saving services improve

the performance ofsmall and medium enterprises in Ngor~z district as most ofthe respondents

positively answered to the statements that were used to measure this objective. The study

found out that Microfinance institutions charge ledgerfees on the accounts ofthe respondents

and that they earn low interest on their savings. The study recommended that the central

bank should regulate the interest charged by microjinance nstitutions in order to favor the

borrowers, Low or no collateral security loans should be introduced among the products and

services of microfinance institutions as the study revealed that collateral security is the

biggest hindrance in attaining a loan from MFIs, owners of small and medium enterprises

should endeavor to take part in the trainings offered by microfinance institutions as the findings of the study revealed that trainings greatly enhance business performance ofSMEs, Microfinance institutions should not charge ledger fees on the accounts of the customers in order to encourage them to delight in serving services and that MFIs should increase on the interest earned on the savings ofcustomers in order to boost their morale for saving.

TABLE OF CONTENTS

DECLARATION

APPROVAL ii

DEDICATION iii

ACKNOWLEDGEMENT iv

TABLE OF CONTENTS v

LIST OF TABLES viii

LIST OF ACRONYMS ix

ABSTRACT x

CHAPTER ONE 1

INTRODUCTION AND BACKGROUNG 1

1.0 INTRODUCTION 1

1.1 Background to the study 1

1.1.1 Historical Perspective 1

1.1.2 Theoretical Perspective 3

1.1.3 Conceptual Perspective 4

1.1.4 Contextual perspective 4

1.2 Problem statement 5

1.3 Purpose of the study 5

1.4. Specific Objectives 5

1.5 Research Questions (I

1.6 Research Hypothesis 6

l7ScopeofStudy 6

1.7.1 Subject Scope 6

1.7.2 Geographical Scope 6

1.7.3 Time scope 7

1.8 Significance of the Study 7

1.9 Operational definition of key terms 8

CHAPTER TWO 10

LITERATURE REVIEW 10

2.0 Introduction 10

V

2.1 TheoreticalReview.10

2.1.1 Theoretical Background 10

2.2 Conceptual Review 11

2.2.1 Microfinance Institutions services 12

2.2.2 Performance of Small and medium enterprises 14

2.3 Related Literature Review 15

2.3.1 Effects of Loan Services on the Performance of SMEs 15

2.3.2 Effects of Training Services on the Performance of SMEs 17

2.3.3 Effects of Savings Services on the Performance of SMEs 19

2.4 Empirical Review 21

2.5 Research Gaps 23

CHAPTER THREE 24

METHODOLOGY 24

3.0 Introduction 24

3.1 Research Design 24

3.2 Population of the study 24

3.3 Sampling techniques and Sample Size 25

3.4 Data Collection Method 25

3.4.1 Primary Sources 26

3.4.3 Data Collection Instrument 26

3.5 Reliability and Validity of the Instruments 26

3.6 Data Processing and Analysis 27

3.7 Ethical Considerations of the Study 27

CHAPTER FOUR 28

PRESENTATION, DATA ANALYSIS AND INTERPRETATION OF FINDINGS .. ..28

4.0 Introduction 28

4.1.1 Age 28

4.1.2 Age of respondents 28

4.1.3 Marital status of the respondents 29

vi

4.1.4 Time spent in B~isincs~ . 29

4.1.5 Level of education of respondents 30

4.2 Loan services and performance of SMEs 31

4.3 Training services and performance of Small and medium enterprises 33

4.4 Saving services and performance of Small and medium enterprises 35

CHAPTER FIVE 37

DISCUSSION OF THE FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

37

5.0 Introduction 37

5.1 Discussion of the findings 37

5.1.1 Loan services and performance of SMEs 37

5.1.2 Training services and performance of Small and medium enterprises 37

5.1.3 Saving services and performance of Small and medium enterprises 38

5.2 Conclusions 38

5.2.1 Loan services and performance of SMEs 38

5.3 Recommendations to the study 39

5.3.1 Loan services and performance of SMEs 39

5.2.2 Training services and performance of Small and medium enterprises 39

5.2.3 Saving services and performance of Small and mediuni enterprises 39

5.4 Limitations of the study 39

5.5 Areas for further studies 39

REFERENCES 41

APPENDIX 1: RESEARCH QUESTIONNAIRE 49

APPENDIX II: Time and Budget Frame 53

APENDIX III: Estimated budget 54