Working capital management, financial skills and business performance of micro, small, and medium-sized enterprises (MSMES) in Nakawa Division

Abstract

The purpose of the study was to assess the relationship of working capital management, financial skills and business performance of MSMEs in Nakawa Division. The study used quantitative approach to help the researcher in generating numerical data and use causal-comparative and correctional design. The unit of analysis were MSMEs and the unit of inquiry were the owners of these businesses. About 132 questionnaires were administered, a total of 130 questionnaires were filled and returned. This represented a 98.480% response rate, which is quite suitable to make a finale for the study. The study was dominated by female respondents, married individuals mostly involved in business activities are had education background. Most MSMEs were registered though employing less than 5 employees. Parametric methods such as Pearson correlation and linear regression were deemed suitable for the analysis. The study found out that the moderating effect of financial skills on the relationship between working capital management (inventory management) and business performance is statistically significant. The findings suggest that strengthening financial skills (Debt management skills, Book-keeping skills, Budgeting skills) through education, training, and partnerships with financial institutions was found to enhance the ability of MSME owners to effectively manage working capital, leading to improved business performance. The study recommended that MSME owners in Nakawa division should invest in developing their financial skills. This can be achieved through training programs, workshops, or partnerships with financial institutions or business development organizations. To further enhance the understanding of financial skills, working capital management, and business performance in the context of MSMEs, future research could explore additional variables, such as marketing strategies, innovation capabilities, or access to technology.