Accessibility to long term finance: Its determinants and effect on growth of EIB-funded Small and Medium size Entreprises in Uganda's hotel industry

Abstract

The purpose of the study was to examine not only the level at which SMEs in Uganda’s Hotel sector access long-term finance extended by the EIB-APEX and the factors influencing this level but also the relationship between them and the level of the SMEs’ business growth. This was as a result of the observation that most of the SMEs were achieving dismal business growth yet it was not clear whether this was due to the level of their accessibility to long-term finance.

The study was conducted as a cross sectional survey involving an analytical design. Its objectives were to examine the level of business growth of the SMEs in Uganda’s Hotel industry, to investigate the level at which these SMEs access long-term finance extended by the EIB-APEX, to establish the factors influencing the level of this access, and to examine the relationship between the level of business growth of these SMEs and their level of access to long-term finance. Data was collected from SME managers using questionnaires and analyzed using the descriptive, ANOVA, factor analysis, correlation and regression methods of the SPSS programme.

The findings show that the level of business growth of the SMEs in Uganda’s Hotel industry was 46.3% predicted by the level of the SMEs’ access to EIB-APEX long-term finance. SME competences were established to have the most significant influence on the level of SMEs’ access to this finance. The level of this access and that of the business growth of the SMEs were both reported as low. The study, thus, concluded by emphasizing the need to improve the level of business growth of the SMEs. To achieve this, it was recommended that SME management and lending institutions should improve the SMEs’ access to loan finance by solving the flaws in the factors influencing this access.