THE EFFECT OF INTEREST RATES ON THE GROWTH OF SME BUSINESSES

An overwhelming majority of the
world population is considered to be poor. Various approaches have
been employed in alleviating poverty, including provision of
micro-credit to the poor populace. It is believed that with
micro-credit, the poor will set up income generating projects, in
this case SMEs. In the past, SMEs were seen to be constrained by the
high interest rates charged on credit accessed which is the commonly
available source of income for their startup and sustainability,Olu,
(2009). With the
modern approach according to Stone et al (2005), micro-credit had
been put at the Centre of SME promotion for the poor, with concerted
effort from governments,financial
institutions,
international bodies like UN, and donor groups. Here in Uganda, micro
credit institutions like SACCOs are not charged with taxes for their
operations as a way of enabling them charge favorable interest rates
to the poor(SME operators) for their personal and enterprise growth.
Therefore, the focus of the studywas
to establish theeffect of
interest rates charged oncredit
tothe growth

of Small and Medium
Enterprises.