SACCO Practices and Multidimensional SME Performance in Uganda: Evidence from Kabale District

Abstract

Small and Medium Enterprises (SMEs) play a critical role in employment generation, poverty reduction, and local economic development in Uganda. However, many SMEs continue to experience limited access to affordable finance, weak managerial capability, operational instability, and low enterprise sustainability. Savings and Credit Cooperative Organizations (SACCOs) have increasingly emerged as important financial institutions supporting SMEs through savings mobilization, financial literacy programs, and credit extension services. This study examined the influence of SACCO practices on multidimensional SME performance in Kabale District, Uganda. The study adopted a convergent parallel mixed-methods research design integrating quantitative and qualitative approaches. Quantitative data were collected from 336 SME operators using structured questionnaires and analyzed using descriptive statistics, Pearson correlation analysis, multiple regression analysis, and Structural Equation Modeling (SEM). Qualitative data were obtained through interviews with SME owners and SACCO stakeholders and analyzed thematically. The study was guided by Human Capital Theory and Financial Intermediation Theory. The findings revealed that credit extension had the strongest positive and statistically significant effect on SME performance (β = 0.115, p < 0.001; r = 0.567, p < 0.01). Saving mobilization demonstrated a positive relationship with SME performance (r = 0.481, p < 0.01), although regression analysis revealed a significant negative coefficient (β = –0.077, p < 0.001), suggesting temporary liquidity constraints among SMEs with limited working capital. Financial literacy demonstrated a moderate positive relationship with SME performance (r = 0.507, p < 0.01), although its direct regression effect remained statistically insignificant (β = –0.032, p = 0.093). The study concludes that SACCO practices significantly influence multidimensional SME performance through integrated financial and entrepreneurial support mechanisms. It recommends strengthening flexible SACCO lending systems, practical financial literacy programs, and enterprise-responsive saving policies to improve SME sustainability and local economic development in Uganda.