FINANCING ALTERNATIVES FOR SUSTAINABLE GROWTH OF MICRO, SMALL AND MEDIUM SCALE ENTERPRISES IN UGANDA: AN IDEAL FRAMEWORK

Abstract

Micro, Small, and Medium-scale Enterprises (MSMEs) play a significant role in fostering employment, innovation, productivity, and wealth creation, all of which contribute to the country's growth in Uganda. However, the majority of these enterprises rarely survive to turn five years old, while others and others persistently fall behind sustainable growth trends in terms of sales turnover, profitability, employee numbers, and total assets due to financial constraints. Despite this position, not much empirical research has been sustainable growth of these businesses. This study set out to develop an ideal financing framework for supporting the sustainable growth of Micro, Small and Medium Scale Enterprises in Uganda. Utilising a quantitative cross-sectional descriptive survey design, the study considered 400 MSMEs from major regional urban centres and municipalities. Data were collected using a researcher-administered structured questionnaire, while descriptive and inferential statistics were used to analyse in its analysis. The relationship between the variables was ascertained using Pearson correlation coefficients. According to the findings, asset-based financing, grants, equity financing, crowdsourcing, and credit guarantees were positively and significantly correlated with the sustainable growth of MSMEs. The study also found a statistically significant negative correlation between traditional bank loans and MSMEs' ability to grow sustainably. According to the study's findings, using more alternative forms of funding such as asset-based financing, equity financing, crowdfunding, credit guarantees and grants would help MSMEs grow more sustainably, whereas using more traditional bank loans would hinder this growth. Thus, asset-based financing, crowdsourcing, equity financing, credit guarantees, and grants constitute the ideal financing framework that MSMEs can adopt to fund their operations and promote their sustainable growth. For this reason, the study was significant in offering an ideal financing framework to improve MSMEs' sustainable growth.