Assessing the effectiveness of Microfinance institutions on the growth and development of SMEs. A case study of Kalingalinga

This study examined the effectiveness of Microfinance Institutions (MFIs) on the growthand development of Small and Medium Enterprises (SMEs) in Kalingalinga using aQuantitative-method design, data was collected from 75 SMEs respondents throughquestionnaires. Primary data was collected and analyzed using Megastat. The findingsreveal a significant association between the ease of accessing credit from MFIs and theaccessibility of microfinance services to businesses. Among respondents who found itvery difficult to access credit, 12 rated accessibilities as very poor and 6 rated it as poor.In contrast, among those who found it easy to access credit, 5 rated accessibilities asgood. The chi-square test confirms a statistically significant association between the twovariables (X2 = 124.35, df = 16, p-value = 0.00), indicating that respondents who foundit easier to access credit also tended to rate the accessibility of microfinance servicesmore favorably. The study has also used the hypothesis test in evaluating whether themean extent of MFI support contributing to business growth is significantly differentfrom a hypothesized value of 3.000, which represents a moderate extent of contribution.The sample mean is 3.307, indicating that, on average, respondents reported a slightlyhigher than moderate extent of contribution. The standard deviation is 1.230, and thestandard error is 0.142. With a sample size of 75 and 74 degrees of freedom, the tstatisticis 2.16, and the p-value is 0.0341 (two-tailed). This indicates that the meanextent of MFI support contributing to business growth is significantly different from thehypothesized value of 3.000 at a 5% significance level. Furthermore, the study showsthat the regression analysis examines the relationship between the challenges faced withrepayment of MFI loans and independent variables like Number of Employees. The R²value of 0.556 indicates that approximately 55.6% of the variation in repaymentchallenges can be explained by the three independent variables. The Adjusted R² value of0.537 suggests that the model is moderately robust. Recommendations are proposed:MFIs should reconsider their loan terms, MFIs should review their interest rates,repayment schedules, and loan sizes to make their services more accessible andmanageable for borrowers. Invest in financial literacy programs, MFIs should invest infinancial literacy programs .