The effects of Loan Conditions on Small Scale Enterprises Performance; A Case Study of Iki-Iki Sacco Budaka District.
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Date
2013-05
Authors
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Publisher
Kampala International University, College of Economics and Management
Abstract
Small scale enterprises are the catalyst for economic growth in most economies thus, the
fundamental objective of this study as to find out what Small Scale Enterprises classify as
disadvantages and advantages of accessing loans in IKI-IKI SACCO Budaka District., to find out
how loans provided by financial institutions are utilized by the Small Scale Enterprises in IKIIKI
SACCO Budaka District., to investigate whether loans to Small Scale Enterprises actually
lead to increase in stated performance or otherwise in IKI-IKI SACCO Budaka District, to
investigate whether these scale enterprises manage to get the loans and why the go for these
loans. So that the ability of Small scale Enterprises s to develop positively and drive economic
growth in the IKI-IKI Budaka District will become real. Simple random sampling technique was
employed in selecting the 157 respondents that constituted the sample size of the research.
Structured questionnaire was designed to facilitate the acquisition of relevant data which was
used for analysis. Descriptive statistics which involves simple percentage graphical charts and
illustrations was tactically applied in data presentations and analysis. The findings of the study
reveal that the percentage distribution of the different types of Bank facility available or accessed
by !KI !KI SACCO Budaka District with respect to the respondents. There was a clear indication
that the distribution was not skewed to just one type of facility. A business can have more than
one type of facility in the Bank depending on the purpose for which it's requested. According to
how respondent utilized loan accessed from the Bank. Majority (51%) utilize the loan by
sourcing raw materials. they buy raw materials to enable production. This enables them to buy as
much as they require to start their business or to add up to existing stock levels. Also the
percentage of respondents that indicated that the type of loan they took from the Bank either
improved the over all firm performance per their own definition or not. 63.7% of total
respondents indicated that the loan improved the overall performance of their finn.36.3%
indicated that the loan did not improve the over all performance of their firm. It was also
discovered that the importance of loan to respondents' firm performance. The respondents
indicates that loan help business overall firm performance in diverse ways: this is because
percentages are not highly skewed towards one impo1iance of loan. Respondents chose more
than one importarn reasons of loan to their firms. Percentage wise, most respondents (38.2%)
opted for increase in returns as their definition for importance of loan with respect to
improvement in over all firm performance. The researcher also revealed that various
disadvantages of loans and their percentages per classification by Respondents. High cost of
capital (31.8%), with a frequency of 50 out of the 157 clients with loan. high cost of capital
being high interest rate charges on loan granted by the Bank usually because of the small
structure of SMEs in comparison to corporate clients, the unce1iainty surrounding the SME is on
the side. this discussed in chapter one and Literature review leads to a high interest rate charged.
It is recommended that Banks should review their interest rates downwards and also
share be,t practices with their Small scale Enterprises customers especially on the efficient use of
loans; this will boost their productivity and support Small scale Enterprises in IKI-IKI Budaka
District.
Description
Research dissertation submitted to the College of Economics and
Management Sciences in Partial Fulfillment of the Requirement
for the Award of Bachelor's Degree in Business
Administration of Kampala International
University.
Keywords
Small Scale Enterprises, Performance, Effects, Loan, Budaka District