Microfinance Institutions Services and Financial Performance of Small and Medium Scale Enterprises in Wakiso District: A Case Study of Division A, Entebbe Municipality

Abstract

This study was conducted on Microfinance Institutions Services and Financial Performance of Small and Medium-Scale Enterprises in Wakiso District: A Case Study of Division A, Entebbe Municipality.  The study aimed to assess the relationship between microfinance loans, savings services, and training services and the financial performance of small and medium-scale enterprises (SMEs) in the region. The study was motivated by the persistent financial challenges faced by SMEs in Division A, Entebbe Municipality, including low profitability, liquidity constraints, and limited access to credit, as highlighted in the Entebbe Municipality Commercial Officer Reports (2021/2022 and 2022/2023). A cross-sectional research design incorporating quantitative methods was adopted. The study population comprised 140 licensed SMEs in Division A, Entebbe Municipality. Using Krejcie and Morgan’s sampling table (1970), a sample of 103 SMEs was selected, and data were collected from business owners using a structured questionnaire. The collected data were analysed using the Statistical Package for Social Sciences (SPSS) v26.0, where descriptive and inferential statistical methods were applied. The study findings revealed a moderate positive relationship between microfinance loans and financial performance (r = 0.853**, p < 0.01), indicating that SMEs that accessed and effectively utilised microfinance loans experienced improved financial performance. Additionally, a moderate positive correlation was observed between savings services and financial performance (r = 0.796**, p < 0.01), suggesting that SMEs that actively participated in savings programs exhibited greater financial stability and business sustainability. Furthermore, the study identified a weaker but significant positive relationship between microfinance training services and financial performance (r = 0.652**, p < 0.01), indicating that while training programs contribute to better financial decision-making, their direct impact on financial performance was less pronounced compared to loans and savings services. The study recommended that SMEs should enhance their access to affordable microfinance loans, strengthen their savings culture, and actively participate in financial literacy programs. Microfinance institutions should design flexible loan repayment structures, improve accessibility to savings services, and provide practical training tailored to SME needs. Additionally, policymakers should create an enabling financial environment to support SMEs in accessing financial resources and ensuring business sustainability in Entebbe Municipality.