Bank Financing of SMES

Abstract

This study investigates the challenges faced by Small and Medium Enterprises (SMEs) in accessing bank financing from private banks in Uganda. SMEs are critical to Uganda's economic growth, contributing significantly to GDP and employment. However, access to finance remains a major obstacle, limiting their potential for growth and innovation. The primary objective is to analyse the key factors that hinder SMEs in Uganda from securing bank financing, focusing on private banks' lending practices and criteria. The study aims to provide insights into the high-interest rates, collateral requirements, credit profiling issues, and performance inconsistencies that affect SME financing. A mixed-methods approach is employed, combining quantitative surveys and qualitative interviews. Quantitative data is gathered from a representative sample of SMEs across various sectors, while qualitative data is collected through in-depth interviews with SME owners, managers, and private bank representatives. Addressing the financial challenges faced by SMEs in Uganda requires coordinated efforts from policymakers, financial institutions, and development partners. By implementing the recommendations, private banks can play a crucial role in fostering the growth and sustainability of SMEs, thereby contributing to the overall economic development of Uganda.