THE CONTRIBUTION OF MICROFINANCE TO THE GROWTH OF SMALL AND MEDIUM ENTERPRISES IN MBALE (case study Mbale industrial area (original) (raw)

This study was about an examination of the contribution of microfinance to the growth of small and medium enterprises in Mbale Industrial area. The study objectives included; examining the various Micro-finance services used by SMEs, identifying the growth rate of Small and Medium enterprises and establishing the relationship between Micro Finance services and the growth of small and medium enterprises in Mbale Industrial Area. The study sampled70 respondents out of a study population of 85 respondents according to Morgan (1970) formula of determining the sample size of the respondents. The respondents included; Business Entrepreneurs, Male, Female and MFIS Staff. The study discovered that the various Micro-finance services used by SMEs include mandatory savings, group loans, individual loans, overdrafts and cash credits. It was fond out that the growth rate of Small and Medium enterprises include the profit growth in 2012, the profit growth in 2013, the sales growth in 2012, the sales growth in 2013, asset growth in 2012, asset growth in 2013, the capital growth in 2012. As regards to establishing the relationship between Micro Finance services and the growth of small and medium enterprises in Mbale Industrial Area. It was found out that the result of the Pearson's correlation reveals a coefficient of correlation of r=0.954 which indicates a very strong positive relationship between microfinance services and the growth of SMEs. With a p-value of 0.000 and alpha of 0.01 (p-value<alpha), there also exist a significant relationship between microfinance and the growth of SMEs. In conclusion, therefore, stability of a business depends on the management mechanisms employed by a business operator. The recommendations are; There is the need for greater awareness for the SMEs on the various micro-finance facilities available and their benefits so that they can optimize the use of the facilities. Financial sector in Uganda is now with only a few standard products which limit the option available to small scale business. The products provided by micro finance institution are basically loan and saving. The business operators should acquire loan with flexible and reliable with terms and condition which do not affect the established business operations or their objective.