Status of Profitability of MSMEs in a Developing Country: Uganda as a Case Study

  • Dr Sazir Nsubuga Mayanja School of Post Graduate Studies, University of Kigali, Kigali, Rwanda
Keywords: Business, Earnings, Equity, Firms, Gross profit, Net profit, Profitability, MSMEs

Abstract

The study set out to assess the status of profitability of MSMEs in Uganda. A cross sectional descriptive design in which both qualitative and quantitative approaches were used was adopted to study a sample of 371 respondents who were systematically sampled from four districts of Wakiso, Mukono, Kampala and Jinja. Most respondents disagreed (65.7%) that their MSMEs are profitable although some significant number of respondents ( 32.0%)  stated that their MSMEs are profitable. Only 2.2% were not decided on the profitability status of their MSMEs. Most MSMEs are not profitable and one of the major problems is poor utilisation of assets and equity to produce return. It is recommended that for profitability to be achieved and consequently growth, the MSMEs should critically examine proposals to purchase assets while recognizing the business they are doing. They should separate for instance business assets and personal assets while making purchasing decisions for business vehicles. Efforts sholud be made such that whenever equity is contributed, return is made thereon.  There should not be additional capital from owners that does not earn a return. Instead efficiency is needed with operations to ensure that operations are profitable so as to increase return on capital invested in form of equity funds.

References

. JULIUS BUSINGE (2017): SMEs are Uganda’s Engine for Growth http://www.Independent.co.ug

. Ben Amoako-Adu1 & Joseph P. Eshun2 (2018): SME Financing in Africa: Collateral Lending vs Cash Flow Lending, International Journal of Economics and Finance; Vol. 10, No. 6; 2018 ISSN 1916-971X E-ISSN 1916-9728 Published by Canadian Center of Science and Education

. African development Bank Report 2008

. Samuel Muiruri Muriithi (2017): African Small and Medium Enterprises (SMES) Contributions, Challenges and Solutions, European Journal of Research and Reflection in Management Sciences Vol. 5 No. 1, 2017 ISSN 2056-5992

. OECD (2017): Enhancing the Contributions of SMEs in a Global and Digitalised Economy, Meeting of the OECD Council at Ministerial Level Paris, 7-8 June 2017

. Ahaibwe, Kasirye & Barungi, (2015) Creating Youth Employment through Entrepreneurship Financing: the Uganda Youth Venture Capital Fund, Research Series, Economic Policy Research Centre (EPRC)

. Roper, S., M. Hart, (2013) Supporting Sustained Growth Among SMEs- Policy Models and, Guidelines Enterprise Research Centre, Working Paper No.7

. Miriam Bruhn, Martin Hommes, Mahima Khanna, Sandeep Singh, Aksinya Sorokina and Joshua Seth Wimpey (2017): MSME FINANCE GAP: Assessment of the Shortfalls and Opportunities in Financing Micro, Small and Medium Enterprises in Emerging Markets, A REPORT OF THE INTERNATIONAL FINANCE CORPORATION 2017

. Anup Singh (2017) MicroSave –Briefing Note #169 MSME Finance in Uganda – Status and Opportunities for Financial Institutions

. Louis Kasekende (2018): Keynote Address at the Stanbic Bank Enterprise Conference Hotel Africana, by Deputy Governor Bank of Uganda, Kampala

. Bagh, T., Nazir, M. I., Khan, M. A., Khan, M. A., & Razzaq, S. (2016). The Impact of Working Capital Management on Firms Financial Performance: Evidence from Pakistan. International Journal of Economics and Financial Issues, 6(3).

. Umar Farooq (2019) Impact of Inventory Turnover on the Profitability of Non- Financial Sector Firms in Pakistan, Journal of Finance and Accounting Research Vol. 1, No. 1, February 2019, 34–51 doi: 10.32350/JFAR.0101.03

. Serge Piabuo Mandief (2016): How Working Capital Affects the Profitability of Commercial Banks: Case of Afriland Cameroon, Arabian Journal of Business and Management Review

. Gitman (2009): Principles of Managerial Finance

. Asian A Umobong (2015): Assessing the Impact of Liquidity and Profitability Ratios on Growth of Profits in Pharmaceutical Firms in Nigeria, European Journal of Accounting, Auditing and Finance Research Vol.3, No.10, pp.97-114, October 2015 ___Published by European Centre for Research Training and Development UK (www.eajournals.org) ISSN 2053-4086 (Print), ISSN 2053-4094(Online)

. Muhammad FS (2018) Impact of Profitability on Market Size of Islamic Banking of Pakistan. Int J Account Res 6: 181. doi: 10.4172/2472-114X.1000181

. A. K. Salman and D. Yazdanfar, (2012): “Profitability in Swedish SME firms: A quantile regression approach,” International Business Research, vol. 5, no. 8, pp. 94-106, 2012

. Stuart MacDonald & Nicola Headlam (2001): Research Methods Handbook Introductory guide to research methods for social research Centre for Local Economic Strategies Express Networks • 1 George Leigh Street Manchester M4 5DL, ISBN: 1870053656

. Uganda Bureau of Statistics (2008), Statistical Abstract, Entebbe, Uganda Government Printers.

. Kreijcie, R.V. & Morgan, D.W. (2001), Determining sample size for research activities, Educational and psychological measurement, 30, 607-610.

. Joppe, M. (2004). The Research Process. Retrieved February 25, 1998, from “http://www.ryerson.ca/mjoppe/rp.htm"

. [22] McGarland, R. & Rauch, S. (2003). Objectifying content validity: conducting a content validity study in social work research.

. Larkey, F.R. & Knight, J.L, (2002). Test-Retest Reliability and the Birkman Method, New York: Houghton Mifflin.

. Cronbach, L. J. (2001), Coefficient alpha and the internal structure of tests. Psychometrika. 16, 297-334.

. Shuttleworth M. Internal Consistency Reliability. 2015. https://explorable.com/internal-consistency-reliability

Published
2020-07-18
Section
Articles