Financial deepening, entrepreneurial competencies and growth of small and medium-size enterprises (SMEs): a case study of manufacturing SMEs in Kampala Capital City.

Abstract

The main objective of this study was to investigate the effect of financial deepening on the growth of manufacturing SMEs in Kampala Capital City with the moderating role of entrepreneurial competencies. To achieve this objective, the study adopted the following specific objectives; examine the effect of credit access on growth of manufacturing SMEs, to evaluate the effect of financial innovations on growth of manufacturing SMEs and to ascertain the moderating effect of Entrepreneurial competencies on the relationship between financial deepening and growth of manufacturing SMEs in Kampala Capital City. The study adopted a descriptive and explanatory research design while using quantitative approach. Data was collected using closed ended questions from 163 managers across various manufacturing SMEs in Kampala Capital City and analyzed using the Statistical Package for Social Sciences (SPSS Version 27) and Andrew F. Hayes’ Macro Process Version 4.2. The findings indicated that both credit access (B=0.403, p=0.00) and financial innovation (B=0.260, p=0.00) positively affect manufacturing SMEs growth in Kampala Capital City. Additionally, the study found that entrepreneurial competencies have a significant negative moderating effect on relationship between financial deepening and manufacturing SMEs growth (B=-0.11, p=0.046, 95% CI [-0.200, -0.020]). Consequently, the study recommends that the government enhance credit access for SMEs by implementing supportive financial policies and boosting financial literacy programs. Financial institutions are advised to offer customized products, lower loan barriers, and embrace innovative financial technologies. Development agencies and NGOs should support SMEs through grants, training, and capacity-building initiatives. Educational institutions should emphasize entrepreneurial training and skill development, while industry associations and business networks should advocate for manufacturing SMEs needs and disseminate information about financial innovations. This research is valuable to various stakeholders, including the government, manufacturing firms, and the Uganda Investment Authority.