Microfinance Policies And Financial Performance Of Smes In Kisoro District, A Case Study Of Kisoro Municipality

ABSTRACT Generally, microfinances provide a wide range of financial services to low-income clients. including sell~ employed and low earning individuals who are working in informal sectors. The core objective or microfinance is to create a favorable environment for the low income self-employed and near-poor households in which they have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and general banking services. Thus, the purpose of this research study was to assess the effects on microfinance policies and financial performance of SMES in Kisoro district, a case study of Kisoro municipality. In order to provide direction and sharpen the focus of this study, this study aimed at achieving the following objectives: (i) To establish the extent to which microfinance policies are being accessed by the small and medium enterprises owners in Kisoro municipality, Kisoro district; (ii) to determine the level of development of small and medium enterprises in Kisoro municipality, Kisoro district and (iii) to establish the relationship between microfinance policies and financial performance of SMES in Kisoro municipality, Kisoro district. This study employed descriptive research design because it allowed the researcher to gather numerical and descriptive data to assess the relationship between the variables. Within this design. the researcher described the microfinance policies as well as the extent of SME development in the study area. Using the same design, the researcher described the relationship between microfinance policies and development among SMEs. The researcher dealt with 135 respondents and employed a questionnaire Survey and used interview guide as a tool to obtain firsthand of information from the key informants on the services they get from Microfinance institutions and how such services have enabled them to grow. This findings on the microfinance policies accessed by SMEs in Kisoro municipality, data analysis using means indicated that microfinance policies were rated satisfactory on average (overall mean=2.79), hence implying that the microfinance institutions provide financial services in terms savings services and small loans services which help in the financial performance in Kisoro municipality. Regarding the growth of SMEs in Kisoro municipality, the findings indicated that the financial performance in Kisoro municipality, Uganda (dependent variable) was generally high and this was indicated by the overall mean of 2.88, hence confirming that the small and medium enterprises in Kisoro municipality perform well in relation to profitability, sales volume and growth in number of customers through offering a variety of quality services to their customers. Regarding the relationship between microfinance policies and the growth ofSMEs in Kisoro municipality, the findings also indicated a positive and significant relationship between microfinance policies and financial performance, this is because the sig-value was less than 0.05 (Sig=O.OOO), hence implying that improvement in access of microfinance policies increase the level of financial performance. The researcher concluded that the small and medium enterprises in Kisoro municipality perform well in relation to profitability, sales volume and growth in number of customers through offering a variety of quality services to their customers. There was an improvement on the access ofmicrofinance policies increases the level of financial performance in Kisoro municipality, Uganda and failure to access microfinance policies reduces financial performance in Kisoro municipality, Uganda. The researcher recommended to the management of microfinance institutions in Kisoro municipality to allow unlimited deposits and withdraws of savings by small and medium enterprises. Small and medium enterprises should carry out promotions in order to increase their business net profit margins.