Access to affordable credit and performance of SMEs in the Central Division Of Kampala City: a case of Kikuubo Business Hub

Abstract

The purpose of this study was to establish the impact of access to affordable credit on the performance of small and medium enterprises (SMEs) in the Central Division of Kampala, specifically in the Kikuubo area. The study aimed to examine the relationships between Collateral Security, Credit Repayment Terms, and Interest Rate Levels with the performance of SMEs in this region. Using a quantitative research approach and a cross-sectional survey, the study focused on a population of 200 registered traders in Kikuubo, with purposive sampling employed. The findings revealed significant relationships between key financial factors Collateral Security, Credit Repayment Terms, and Interest Rate Levels—and SME performance. Collateral Security was identified as a critical factor that enhanced access to credit, thereby improving SME financial stability. Flexible Credit Repayment Terms were found to positively correlate with SME performance, as they supported better cash flow and reduced default rates. Lower Interest Rate Levels were also found to have a positive impact on SME performance, as affordable financing allowed businesses to invest in growth opportunities. The study recommended that policymakers and financial institutions explore ways to reduce or diversify collateral requirements to improve SME access to credit, particularly for women- owned enterprises. It also suggested that future research could explore other financial factors, such as loan duration and financial product innovation, to further understand their influence on SME performance. The study received a 98% response rate.

Subject keywords: Affordable credit; Performance; SMEs; Central Division; Kampala City; Kikuubo Business Hub