Interest Rates and SMEs: A Study of Performance Dynamics in Arua Municipal Council, Uganda

Rashid Onzima; Wilfred Kokas Aupal; James Patrick Alomu; Anna Elsie Luyiggo

Rashid Onzima Uganda Technology And Management University (UTAMU)
Wilfred Kokas Aupal Uganda Technology And Management University (UTAMU)
James Patrick Alomu Uganda Technology And Management University (UTAMU)
Anna Elsie Luyiggo Uganda Technology And Management University (UTAMU)

Keywords: Interest Rate, Performance, SMEs

Abstract

Interest rate is viewed by many scholars as factor that has a direct influence on the performance of SMEs. This paper therefore examined the relationship between interest rate and the performance of Small and Medium Enterprises (SME’s) in Arua Municipal Council, Uganda. A cross sectional design adopting both the qualitative and quantitative approaches was utilized. With a population of 224 SMEs, a sample of 149 respondents was drawn using both purposive and simple random sampling techniques and this yielded a response rate of 87.3%. Validity and reliability of instruments was taken care of, and data was collected using self-administered questionnaires and interview guide. Quantitative data was analysed using SPSS while the qualitative data was based on the content analysis. The results indicated that, there is a positive significant relationship between interest rate and the performance of SMEs in Arua Municipal Council with a significant correlation coefficient (r=0.270, sig= 0.01). In conclusion, the paper established that interest rate influences SME’s performance. In order to enhance SME’s performance, it’s important for government to strengthen mechanisms for controlling the interest rates in order to strengthen SME’s performance.

Author Biography

Anna Elsie Luyiggo, Uganda Technology And Management University (UTAMU)

Interest rate is viewed by many scholars as factor that has a direct influence on the performance of SMEs. This paper therefore examined the relationship between interest rate and the performance of Small and Medium Enterprises (SME’s) in Arua Municipal Council, Uganda. A cross sectional design adopting both the qualitative and quantitative approaches was utilized. With a population of 224 SMEs, a sample of 149 respondents was drawn using both purposive and simple random sampling techniques and this yielded a response rate of 87.3%. Validity and reliability of instruments was taken care of, and data was collected using self-administered questionnaires and interview guide. Quantitative data was analysed using SPSS while the qualitative data was based on the content analysis. The results indicated that, there is a positive significant relationship between interest rate and the performance of SMEs in Arua Municipal Council with a significant correlation coefficient (r=0.270, sig= 0.01). In conclusion, the paper established that interest rate influences SME’s performance. In order to enhance SME’s performance, it’s important for government to strengthen mechanisms for controlling the interest rates in order to strengthen SME’s performance.