Micro finance services and growth of small and medium Enterprises in Bujumbura, Burundi

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Kampala International University
This study investigated the effect of microfinance services on the growth of small and medium enterprises in Bujumbura, Burundi. The study was undertaken in Ngagara, Rohero and Buyenzi districts in Bujumbura. Loan Provision, Savings mobilisation and financial skills training were three services provided by Microfinance examined in this study. The objectives were to determine how Loan provisions affect the growth of SME, how the mobilisations of savings affect the growth of SMEs and how financial skills training affect the growth of SME. A sample of 173 owners of SME beneficiaries of Microfinance services located in Bujumbura were respondents to this study. The researcher made questionnaire which was used as the main instrument of data collection. Descriptive research design was used with a quantitative approach. The Pearson linear correlation coefficient, simple linear regression and multiple regression analysis were used to analyse data. The findings revealed that there was a significant positive linear relationship between loan provision and growth of SMEs, with a PLCC of 0.869 at p<0.05 level of significance. A strong positive relationship between mobilisation of savings and growth of SMEs was found with a PLCC of 0.846 (p<0.05) level of significance. Moreover, there was a significant positive linear relationship between financial skills training and growth of SMEs in Bujumbura, Burundi at a PLCC of 0.864(p<0.05). Loan provision affected growth of small and medium enterprises in Bujumbura by 75.2%; implying a very high effect. Savings mobilisation had a 71.4% effect on the growth of small and medium enterprises, thus a very high effect as well. The researcher concluded that credit finance delivered by Microfinance Institution to small and medium enterprises in Bujumbura positively affect the growth of small and medium enterprises. Access to loans through microfinance will help SMEs to get more income. The positive nature of the effect meant will strengthen savings by improving accessibility to the savings services and it will translate into a significant improvement in the business registered by the SMEs in terms of sales revenue, profitability, sales expansion and job creation. It is recommended that small financing institutions such as Microfinance Institutions to small and medium enterprises in Bujumbura should encourage the growth of small and medium enterprises by promoting soft loans to entrepreneurs. Contribution to knowledge of this study is the fact that it provided a better understanding of microfinance policies and how access to them can contribute to development of small and medium enterprises in Africa in general and particular to eastern countries. The study generated useful insights that can be used by the government and non-governmental organizations to promote the accessibility of credit to SMEs from MFIs and improving the microfinance policies focusing on financial growth in developing countries.
A research report submitted to the college of economics and management in partial fulfillment of the requirements for the award of a master’s degree in business administration (finance & accounting) of Kampala International University
Micro finance services, Small and medium Enterprises