Exploring challenges and opportunities of Revenue-Based Financing (RBF) for small and Medium-Sized Enterprises (SMEs) in Uganda: a case study of the Social Innovation Academy (SINA) purpose pool in Mpigi district

Abstract

The study explored the challenges and opportunities of RBF for SMEs in Uganda, focusing on the SINA Purpose Pool (SPP) as a case study. The purpose was to analyse RBF as an alternative financing option, evaluate its mechanism, and assess recipient SMEs' experiences to provide insights for broader application. The study was guided by the research objectives of assessing RBF’s applicability, identifying challenges, and proposing recommendations for its enhancement. The research used qualitative design using structured questionnaires targeting SME owners within the SINA community. Findings reveal key opportunities, as businesses exhibit traits favourable for RBF uptake, including formalization, possession of active bank accounts, and financial record-keeping, which enhance credibility with investors. Many SMEs demonstrated repayment capacity through strong revenue growth projections and operational discipline. Additionally, RBF funds were expected to support revenue-generating activities such as technology upgrades and production scaling, strengthening repayment ability. Despite limited awareness, interest in RBF is growing, with many SMEs willing to recommend it to peers. However, adoption faces barriers, including high repayment costs, limited awareness, and concerns over revenue-sharing mechanisms. Cash flow constraints and misaligned RBF terms further reduce viability for certain SMEs, while investor concerns over financial transparency create monitoring challenges. The study recommends targeted education campaigns, flexible repayment terms, and trust-building mechanisms to foster transparency. Expanding RBF availability and positioning it as an alternative to grant funding could amplify its adoption. Further research should examine RBF’s long-term impact on SME performance, sector-specific applicability, risk management by providers, and policy frameworks to enhance its viability as a financing model .