The role of SACCOS in enhancing the performance of micro, small and medium enterprises, case study, Nakawa division

Abstract

The study set out to examine the relationship between role of SACCOs and the performance of Small and Medium Enterprises in Kampala taking a case of Nakawa division. It was guided by three specific objectives; to examine the role of loan interest and the performance of SMEs in Nakawa Division; to find out the role of loan period and the performance of SMEs in Nakawa Division; and to establish the role of collateral requirements and the performance of SMEs in Nakawa Division. Using a case study design, data was collected from a total of 94 respondents. Correlation and regression analysis were applied to establish the relationship between the variables and descriptive statistics including frequency, percentages were used to analyze the respondents ‘demographic characteristics. The mean and standard deviation was used to examine the respondents ‘opinions on the study variables. Findings, showed a significant positive correlation (r= .318) between low/high interest rate and performance of SMEs. These findings were subjected to a test of significance (p) and it is shown that the significance of the correlation (p = .000) is less than the recommended critical significance at 0.05. There was also a significant positive correlation (r= .325) between loan period and SME performance. There was a significant positive correlation (r= .325) between Collateral requirements and the performance of SMEs in Nakawa Division. The study concludes that money lenders avoid industry which has higher risk. Results on the collateral requirements indicated that most lending institutions utilize the transaction and relationship lending to determine SMEs creditworthiness. It is recommended that there should be a paradigm shift on the top management of lending institutions that SME has its own unique characteristics and that they are different from large corporates. The techniques and evaluation methods for large corporates are not relevant to SMEs.