Browsing by Author "Josephine Bakhita"

Now showing 1 - 1 of 1
  • No Thumbnail Available
    Item
    The effects of credit terms on financial performance of small and medium enterprises in Mukono Central Division
    (Uganda Christian University, 2026-04-22) Josephine Bakhita
    This research thus looked at the influence of credit terms on the financial performance of SMEs in Mukono central division with three aims; to test the influence of interest rates on financial performance of SMEs in Mukano central division, to test the influence of payment period financial performance of SMEs in Mukano central division and finally to test the influence of late payment penalties financial performance of SMEs in Mukano central division. The research design was quantitative and a cross-sectional survey. Structured questionnaires were used to collect data on 180 SMES owners and managers (80 percent response rate) in retail, wholesale, manufacturing and service sectors. Analysis of descriptive statistics was done using SPSS. Stratified random sampling was used to select the respondents. The results indicated that there was a huge agreement that high interest rates impacted adversely on financial performance (overall mean = 4.42/5.00). More than 94 percent of the people interviewed said that high rates deter expansion investment and 93 percent said that the prevailing rates of about 23 percent are excessive. In relation to repayment periods, 94.5 percent reported that they would be able to grow as they would have longer repayment periods, and short periods (12-24 months) cause cash flow problems and require them to focus on repayment, rather than growth. Regarding high penalties as a way of dealing with late payments, more than 91 percent responded that high penalties are part of debt and stagnation cycles, exacerbate cash flow in the slow sales period, and decrease the amount of funds available to reinvest. The study finds that high interest rates, low-term repayment, and tough late repayment penalties are major factors that negatively impact the SMES financial performance by raising the cost of borrowing, causing cash flow imbalances, and trapping debt cycles. The research suggests that the policy-makers should introduce interest rate subsidies and credit guarantee programmes, financial institutions should come up with flexible credit products with longer repayment periods and clear-cut penalty frameworks, and owners of SMES should also better their cash management and negotiate attractive credit terms. The shortcomings are the cross- sectional approach and geographical scope of Mukano Central Division.