Assessment of financial inclusion among micro, small & medium enterprises; a case study of Kampala central division

Abstract

The study examines financial inclusion among MSMEs, a case study of Kampala Central division. The objectives of the study were; to establish the current level of financial inclusion, to identify the factors affecting the level of financial inclusion and to suggest possible strategies to improve financial inclusion among MSMEs, case study of Kampala Central. The study was conducted using a descriptive cross sectional research design. A quantitative research approach was used to obtain numerical data; self-administered questionnaires were coded, edited and analyzed using frequencies and percentages. Findings show that there is low level of financial inclusion among MSMEs with a smaller percentage of MSMEs owning and actively using bank account, majority are not qualified for a loan, a bigger percentage had no any form of insurance cover and most of them found difficulty in accessing and using financial services. Regarding the factors affecting the level of financial inclusion among MSMEs; Prices of financial services, level of awareness and understanding of financial products, degree of documentation in account opening and collateral requirements, level and regularity of earnings from businesses, level of trust in the financial institutions and their design, procedures, charges and corruption levels in business registration process affect the level of using financial services and financial inclusion. A study further reveals that; lower pricing of financial services, group mode of financing like Self Help Groups (SHGs), well tailored and Innovative financial products designed to fit smaller businesses, accessible and affordable infrastructures, capitalization on agent banking and bank sale of insurance policies, creation of awareness through sensitization about the financial products, training business skills and financial literacy among owners and employees in businesses can improve decision making and promote the use and access to financial services. The research made the following recommendations; MSMEs should join financing groups, financial institutions should consider lowering the prices on their services, design more innovative products, and minimize documentations and other requirements. Financial institutions and government should focus on creating awareness on their financial services, train and provide literacy skills to MSMEs, create accessibility and affordability of financial services, also capitalize on agent banking and Banc-assurance to increase use of financial services.