MICROFINANCE LENDING TERMS AND THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN GULU CITY, UGANDA
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Date
2026-06-06
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Gulu University
Abstract
This study examined the influence of microfinance lending terms on the performance of Small and Medium Enterprises (SMEs) in Gulu City, Uganda. Specifically, the study established the lending terms offered by microfinance institutions, assessed the performance of SMEs accessing microfinance loans, examined the effects of lending terms on SME performance, and explored the moderating role of government policy frameworks. A cross-sectional research design and quantitative approach were employed, involving 221 SME owners and managers. Data was analyzed using descriptive statistics, Pearson correlation, and multiple linear regression techniques. The findings revealed that loan accessibility was the most influential lending term, positively contributing to SME growth, profitability, and sustainability. Although interest rates, collateral requirements, and repayment schedules were generally perceived as supportive, concerns regarding affordability and flexibility remained. The study further found that SMEs exhibited moderate levels of growth, profitability, and sustainability, despite challenges related to market expansion and financial stability. In addition, supportive government regulations and SME support programs significantly enhanced SME performance by creating a more favorable business environment. The study concluded that accessible and SME-friendly microfinance lending terms, together with effective government support mechanisms, are essential for improving SME performance. It recommends enhancing loan accessibility, adopting more flexible lending conditions, and strengthening government support programs to promote the growth, profitability, and sustainability of SMEs in Uganda.
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Keywords
Lending Terms, Performance of SMEs, Microfinance Institutions, Gulu City.
Citation
MUSINGUZI ROGER(2026)MICROFINANCE LENDING TERMS AND THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN GULU CITY, UGANDA