Sacco Services and Growth of Small Scale Enterprises in Mbarara Town

ABSTRACT The importance ofSACCO to eradication ofpoverty cannot be overemphasized. SACCO offer financial services to active poor who were traditionally neglected by conventional banks with a view towards lifting them out ofpoverty. Hence, this study sought to establish the effect that commercial bank services have on the growth of small scale enterprises in Mbarara- Town. Even ~f it is a government policy to ensure that all people have access to financial services but many businesses in Mbarara have continued to sufferfrom lack ofproper skill~ the inability to access credit~, high interest rate on short-term investment loan which have led to a highfailure rate ofsmall scale enterprises in Town. The objectives were to establish the effect ofseed capital on the growth ofsmall scale enteiprises, to determine the effect offinancial skills training on the growth of small scale enterprises and to assess the effect of mobilization of savings by SACCO on the growth of small scale enterprises. The study employed a cross-sectional research design. The data were collected from people operating in small scale enterprises in Mbarara- Town. A sample of 176 respondents were determined from 315 target population. The data was analysed using simple regression analysis. The study findings were tha tprovision of seed capital affect the growth of small scale enterprises by 24,6% implying low effect, skills training have a 49.4% effect on the growth of small scale enterprises and mobilization of savings had 82.1% effect on growth of small scale enterprises. On the first objective the researcher established that seed capital had less effect on the growth of small scale enterprises; meaning that there are other factors that account more for the small scale enterprises growth, even that the argument that seed capital is not provided to starting small scale enterprises is a proof for not growing well. The effect on the second research objective that established financial skills training on the growth of small scale enterprises was low though substantive, the researcher concludes that training could be not so adequately advanced to the small scale enterprises explaining the low growth rate regarding this other factors contributions are considerably low. The third objective established that there was a high sign~icant effect of saving mobilization on growth of small scale enterprises in Mbarara- Town. The researcher recommended that the status of the business operations need to acquire collateral security before operation in order to attain value for seed capital~ there is need for more training by SACCO to small scale enterprises and there is need for improving savings through providing attractive interests on savings and other relevant practices.

TABLE OF CONTENTS

ACKNOWLEDGEMENT

DECLARATION

APPROVAL

DEDICATION

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iv

TABLE OF CONTENTS v

LIST OF TABLES

LIST OF ACRONYMS ix

ABSTRACT x

CHAPTER ONE 1

INTRODUCTION 1

1.1 Background of the Study 1

1.1.1 Historical Perspective 1

1.1.2 Theoretical Perspective 2

1.1.3 Conceptual Perspective 3

1.1.4 Contextual Perspective 4

1.2 Problem Statement 8

1.3 Purpose of the Study 8

1.4 Specific Objectives of the Study 8

1.5 Research Questions 9

1.6 Research Hypotheses 9

1.7 Scope of the study 9

1.7.1 Geographical Scope 9

1.7.2 Content Scope 9

1.7.3 Time Scope 10

1.8 Significance of the study 10

1.9 Definition of Key Terms 11

CHAPTER TWO 12

LITERATURE REVIEW 12

2.0 Introduction 12

2.1 Theoretical Review 12

2.1.1 Collateral Pledging Theory 12

2.1.1.1 Tangible Assets Availability 14

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2.1.1.2 Group Guarantees Availability 14

2.1.2 Transaction Cost Approach 15

2.2 Conceptual Review 16

2.3 Review of Related Literature 18

2.4 Empirical Review 23

2.5 Research Gap 25

CHAPTER THREE 26

METHODOLOGY 26

3.0 Introduction 26

3.1 Research Design 26

3.2 Target Population 26

3.3 Sample Size 26

3.4 Sampling procedure 27

3.5 Sources of Data 28

3.6 Research Instruments 28

3.6.1 Questionnaire 28

3.6.2 Secondary Source 28

3.7 Validity and Reliability of Instruments 29

3.8 Data Collection Procedure 30

3.9 Data Analysis 30

3.10 Ethical Consideration 31

CHAPTER FOUR 32

DATA PRESENTATION, ANALYSIS AND INTERPRETATION 32

4.0 Introduction 32

4.1 Response Rate 32

4.2 Demographic profile of the respondents 32

4.3 Descriptive Statistics for Commercial Bank Services 34

4.3.1 Provision of Seed Capital 34

4.3.2 Descriptive Statistics for Financial Skills Training 35

4.3.3 Descriptive Statistics for Mobilization of Savings 36

CHAPTER FIVE 44

DISCUSSION, CONCLUSION AND RECOMMENDATION 44

5.0 Introduction 44

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5.1 Discussion of the Study .44

5.1.1 Discussion of Findings on Seed Capital and the Growth of Small Scale Enterprises .,.. 44

5.1.2 Discussion of Findings on Financial Skills Training and the Growth of Small Scale

Enterprises 45

5.1.3 Discussion of Mobilization of Savings on the Growth of Small Scale Enterprises 45

5.2 Conclusion 46

5.2.1 Effect of Provision of Seed Capital on the Growth of Small Scale Enterprises 46

5.2.2 Effect of Financial Skills Training on the Growth of Small Scale Enterprises 46

5.2.3 Effect of Savings Mobilization on the Growth of Small Scale Enterprises 47

5.3 Recommendations 47

5.3.1 Recommendation on Provision of Seed Capital 47

5.3.2 Recommendation on Financial Skills Training 47

5.3.3 Recommendation on Mobilization of Savings 48

5.4 Limitations to the Study 48

5.5 Suggestions for Further Research 49

5.6 Contribution to the Knowledge 49

REFERENCES 50

APPENDICES 54