Commercial banks’ lending policies and financial performance of small-scale businesses. a case study of owino market in Kampala city:

Abstract

The purpose of the study was to determine the relationship between commercial banks lending policies and financial performance of selected small scale businesses in Kampala City. The study was guided by three objectives namely; to examine the lending policies used in Commercial Banks by Small Scale Businesses, to establish the factors influencing the financial performance of Small Scale Businesses and to examine the relationship between Commercial Banks lending policies and financial performance of selected small scale businesses. The study used data collected using a questionnaire and interviews and during the study, descriptive research design was used as both quantitative and qualitative research methodologies were also used while a sample of 60 respondents was used. The study examined the lending policies used in Commercial Banks by Small Scale Businesses in. Kampala city, interest rate, property valuation, repayment period, type of loan needed and minimum and maximum amount of loan were the profoundly used policies to determine the lending out of credit also various small scale businesses operated in Owino market and they included; hard ware, clothe selling, general merchandise, restaurants and pubs, chapatti making and food processing and selling. Meanwhile the relationship between lending policies and performance of small scale businesses in Kampala was manifested in; amount of money given, relationship with commercial banks, high value of security needed, low repayment period and high interest, In addition, small scale business in Owino market have been influenced by very many factors such as; poor communication, lack of focus, high taxes, electricity supply, high interest, poor roads, high value of security, unskilled employees, rent, lack of trade credits and customer care. The study recommends that there is need for Commercial Banks to reduce further on the interest rate they charge on credits business clients apply for, business persons ought to form business~ associations; these will enable entrepreneurs lobby support from government also business training is important for entrepreneurs in Owino market and Commercial Banks should adjust on the collateral security demanded as a prerequisite for a loan.