Linking Smes to sources of credit :

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Kampala International University, College of Economics and Management
This study sought to evaluate the performance of selected Micro Finance Institutions (MFIs) in Kampala District. The industry has experienced significant growth and despite this growth, the rural financial sector is largely underdeveloped, fragmented, and not adequately integrated with the formal financial sector. The costs of operation of MFls are also generally higher than those of the formal financial institutions since MFl clients are generally located a distance from the branches and require continuous monitoring. Consequently interest rates are higher for loans obtained from MFIs. The objectives of the study were; to ascertain the extent to which the selected MFIs have linked Small and Medium Enterprises (SMEs) to sources of credit, to evaluate the performance of selected MFls using Operational efficiency indicators, Outreach indicators, and Portfolio Quality perceptions and finally, to assess the impact of credit on SMEs’ sustainability. The study followed a well defined process that utilized a consortium of techniques which included; collection of secondary data, interviews, administering of questionnaires, and observation. Different data collection techniques were applied at varying stages depending on the situation. The findings indicate that although the MFls have performed below a set standard on average due to some industry wide challenges, they have had a significant impact in linking SMEs to sources of credit. The researcher recommends that the policy makers formulate a strategic plan on the SME5 and the MFIs for prudential operations. They should also make information disclosure by MFIs mandatory. MFIs are encouraged to introduce insurance products to cushion both themselves and the SMEs in the event of problems.
A thesis submitted to the school of post graduate studies, in partial fulfillment for the award of the Degree of Master of Business Administration of Kampala International University
Smes, credit, Microfinance institutions, Kampala