IMPACT OF MICRO- FINANCE LOANS ON THE GROWTH OF SMALL & MEDIUM SIZE ENTERPRISES (SMEs) IN SOUTH SUDAN: A CASE STUDY OF KICK START SAVINGS AND CREDIT COOPERATIVE JUBA CITY, SOUTH SUDAN. BY ATITI JACKLINE BB(ACCOUNTING AND FINANCE) A RESEARCH REPORT SUBMITTED TO THE
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IMPACT OF MICRO- FINANCE LOANS ON THE GROWTH OF SMALL & MEDIUM
SIZE ENTERPRISES (SMEs) IN SOUTH SUDAN:
A CASE STUDY OF KICK START SAVINGS AND CREDIT COOPERATIVE
JUBA CITY, SOUTH SUDAN.
BY
ATITI JACKLINE
BB(ACCOUNTING AND FINANCE)
A RESEARCH REPORT SUBMITTED TO THE
DIRECTOR OF RESEACH FOR PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF BACHELOR DEGREE IN BUSINESS
ADMINISTRATION IN ACCOUNTING AND FINANCE OF MAKERERE
UNIVERSITY KAMPALA(UGANDA)
DECLARATION
I Atiti Jackline, declare that this research report is my original work and that it has never been
presented for a degree award at any other university.
Signature: ………………………………………………
Atiti Jackline.
Date: ………………………………………………….
APPROVAL
Signature: …………………………………
……………………………………………
Name of the supervisor
…………………………………………..
Title of the Supervisor
Date: ……………………………………..
This research report has been submitted for examination with my approval in partial fulfillment
of the requirement for the award of a Bachelor Degree in Accounting and finance of Makerere
University.
DEDICATION
I dedicated this simple yet valuable piece of work to my beloved Dad VICTOR ONJE and my sweet mum SARAH ONJE, my lovely sisters Aguli Elizabeth, Lina Konyo, Rosy Samia, Susan Nunu, Ndio Winnie and my helpful brothers, Gita John, Salah Nalson, Bati Nyamiri, Yango, Siliy Julius, Ayiko Gideon and not forgetting my Sweetee Hassen Desire and my sweet baby Gloria for having supported me in academic up to this far, and to all my friends for their encouragment.
ACKNOWLEDEMENT
I here by extent my heartfelt and gratitud to the almighty GOD for havinh seen me through the Dissertation and making it successful for foregone conclusion. In the manner, I humbly extent my
vote of thanks to the aministration of Makerere Univeristy for having given us this opportunity to carry out this exercise.
ABSTRACT
The research was about the impact of micro-finance loans on the growth of small and medium
enterprises in south sudan.
The objectives of research were:
The examine the challenges that face SMEs in assessing micro-finance loans.
To fine out the contribution of loans to the development of SMEs
The research used both secondary and primary data. primary data was collected uing
questionnaries and interviews while secondary was collected through the use of documenttary
review the is, extracting data from textbooks journals and already existing research reports.
The research questionnaire based on the topic and issued it to the respondents to fill and
collected them later.
The rearch used data control mehtods for reguler checks to avoid chances of double counting. editing was done on contnuous base to ensure accuracy, uniformity and compleneness. codes were assigned to the respondents to make analyis and tabulations. then the data collected was then entered into a computer package called microsoft excel for easy analyis and interpreptation.The rsearch also used graphs to present information in a wwy it is easy to interpret undrstand and interestingly looked at.The research found out that SMEs, faced legal frame work in South Sudan for their attempt to assessMicro-finance loans. This was evidenced in table 32 where by 31.3% of the respondents disclosed that they faced problems in getting passports to present to the government for the loans processsing. The SMEs faced limited services by micro-finance institutions as given in table 32. Micro-finance institutons require considered people who were located near their premises for easy montoring. Lack of gurantee had also been a big problem to SMEs to assess loans. Micro-finance institution rquired guatantee for an individul to be given a loan.The research found out the following challenges that faced Microfinance institutions in their attempt to operate in south sudan. Failures to meet the deadlines by thier clients as dicloseed 62.7% by the respondents. This created problems on running the business.Another challenge was high level of illiteracy which affected the operation of Mirrofinance institutions in south sudan as discoseed by 20% otf the respondents. This created inefficiency in the operation.The ongoing demolition of the market created problems in getting more customers for the product.The research also found out that the microfinace instituions contributed the following to the development of SMES. The MFIs extented loans for the development of SMEs as reflected by 88.9% of the respondants. This loans helped the SMEs to start up their business and keep it growing. SMEs also gave training to the clients as disclosed by 11.1% of the respondents.This
training was given so that the clients do not make losses in their business and hence would be able to pay the loans in time.Mirofinance is more like assets to the developing countries. The services the give to thr clients tailoured to meet the needs and aspirations of local people and emphasess towords poor and growth of SMEsHowever the majority of microfinance in soith sudan faced with several challenges which may include the following failures to meet repayment deadline, scarcity of skilled labour due to competition and lack of legal frame work among others. This challenges if left to continue will only lead to down fall of microfinanceOn the other hand clients are faced with a number challenges ranging from security , failure to meet criteria ,poor infrastrures and kwoledge of FSSL services. The survey however conclude that despite the numerous challenges facing both FSSL and microfinance the remain with postive contribution towards SME
I therefore recomend micro finance institutions to give more effort in finacing SMEs for their role to be felt. Likewise, SMEs themselves should be receptive of few finacing ideas of the
SMEs and be prepared to make finacial commitments to ensure growth. Guidlines should also be put for MEIs to finace SMEs and lastly,it is the researcher's suggession that MFIs should find the
will and researchers to contribute to the development of SMEs The researcher suggested that future research should be directed to finding out the courage of microfinace institutions in south sudan.
CHAPTER ONE
Micro-finance loans refers to debt evidenced by a note which specifies among other things the principles amount interest rates and thew date of repaymet on the other hand growth refers to the increase in the amount of goods and services produced by an economy over time. the study aims at finding out the contribution of the micro-finance loans to the growth of the small and medium size enterprises in South Sudan. The charpter of the back ground of the study. The's Athieno (2011) Find out that many LDCs adopt a definition of SFMs that covers all firms that have employees below 250. Therefore, this includs the micro-firms. under this definition the majority of all business in develop countries are considered as SEMs cubing 2012. This charpter cotains the statment of the problem, objectives of the study research questions the scope of the study and finally the significances of the study.
1.1 Background to the study
Small businesses are generally regarded as the driving force of economic growth, job creation,
and poverty reduction in developing countries. They have been the means through which
accelerated growth and rapid industrialization have been achieved and political development
catalysts in both developed and developing economies. Mwangi(2011).Maalu, et. al. (2005)
discussed the role of Micro and Small Enterprises in the economy and noted the important role it
has played and continues to play.
In addition to the employment creation and income generation, the study noted other important
roles in the economy such as production of goods and services and development of skills. A
study by African Development bank group (2012) on the impact of micro finance services on the
growth of SMEs in South Sudan found a strong positive relationship between micro finance
services and growth of SMEs. The South Sudan Government’commitment to foster the growth of
MSEs emerged as one of the key strategies in 2005 after the signing of CPA( Comprehensive
peace Agreement) between Government in Khartoum and Juba. It was reinforced as a priority in
2012-2014 Interim Country Strategy Paper (ICSP) for the Republic of South Sudan (RoSS) for
the period 2012-2014following the country’s independence on 9 July 2011 and it subsequent
official admission as member of the Bank Group on 1 June 201 in Arushareport, a document that
set out the mechanisms for removing constraints to growth of MSE sector in the country.
In 2012, the government published the MSE policy report. This report was reviewed in 2002,
leading to a new policy framework that provides a balanced focus to MSE development in line
with the national goals of fostering growth, employment creation, income generation, poverty
reduction and industrialization.(Kenya Agency for the Development of Enterprises and
technology (2005). Vision 2030 had also emphasized the importance of Micro and
SmallEnterprises in Kenya. Micro and Small Enterprises are noted as a crucial catalyst
foachieving the vision 2030.
1.1.1 Growth of Small Medium Enterprises
One of the most important themes that come up in discussions about business is thesubject of
growth. Majority of studies on growth have been undertaken based on the law of Proportionate
Effects or Gibrat’s law. Gibrat’s law states that firm growth rate isindependent of firm size. The
studies have therefore categorized businesses into three categories: small, medium and large
enterprises. The available studies on growth have also used varied metrics to measure growth.
Howard (2006) laid out a frameworkdescribing how businesses grow. While he identifies seven
stages of organizationagrowth, the first three stages are of particular importance and interest to
small businesses Howard (2001). The first stage is that of new venture, which is when a small
business isjust beginning. Markets and products are being developed in this stage. The second
stageis expansion and can focus on increased sales, revenues, market share, and ultimately
thenumber of employees. Howard,( 2006). The third stage is professionalization, andfocuses on
formalizing the goals, processes and functions of the organization and isconsidered to be closely
related to expansion. Howard,( 2001). Stage four isconsolidation, and focuses on issues faced by
firms once they have made the transition toprofessionally managed organizations with working
systems in place, focusing more onmanaging its corporate culture. Diversification is the fifth
phase, focusing on developingnew products for markets for which the organization is already
providing goods andservices. The sixth stage is integration, focusing on developing an
infrastructure tosupport multiple business units. The final stage is that of decline and
revitalization andfocuses on rebuilding the organization at all levels, to ensure continued
survival. Howard (2006).Business growth is typically defined and measured using absolute or