Title: The Role of Microfinance Institutions in Supporting Small and Medium Enterprises (SMEs) in Uganda: A Case Study of FINCA Uganda
Authors: Mwesigwa Henry, Kaziro Nicholas
Volume: 9
Issue: 2
Pages: 45-49
Publication Date: 2025/02/28
Abstract:
This study explored the role of microfinance institutions, specifically FINCA Uganda, in supporting the growth and sustainability of Small and Medium Enterprises (SMEs) in Uganda. With the increasing importance of SMEs in the Ugandan economy, the research aimed to assess the extent to which FINCA Uganda's financial products and services contributed to SME development, identified key challenges faced by SMEs in accessing and utilizing these services, and evaluated the impact of these microfinance interventions on financial stability, business expansion, and profitability. The study employed a mixed-method approach, using both quantitative and qualitative data collected from SME owners and managers in Kampala District. Regression analysis was conducted using SPSS and STATA to examine the relationship between variables such as loan size, years in business, interest rates, and loan terms with SME growth, challenges, and financial stability. The regression analysis revealed that loan size (? = 0.45, p < 0.01) and years in business (? = 0.32, p < 0.05) were significant factors influencing SME growth and financial stability. Larger loans were associated with enhanced business growth, fewer challenges in accessing financial services, and greater financial stability. Conversely, interest rates (? = 0.05, p > 0.05) and loan terms (? = 0.12, p > 0.05) were found to have little to no significant effect on the SMEs' outcomes. The study recommends that FINCA Uganda increase loan sizes, develop tailored financial products, and provide targeted support for new and small businesses. It also emphasizes the importance of improving financial literacy and expanding outreach to rural SMEs to foster greater financial inclusion and business sustainability.