Access to Finance and Performance of Small and Medium Enterprises in Rwanda

Small and Medium Enterprises play an important role in development of many countries. They have lifted hundreds of millions of people out of poverty in developed countries. Using internal finance, it is not easy to acquire enough resources in business, and financial institutions provide loan as external sources to increase the capital. This helps to use the fixed cost at maximum level to increase profit. Unfortunately, the great number of SMEs are facing the problem of lack of finance due to several challenges and lead to poor performance which finally, influence negatively job creation and some of them failure. To overcome these challenges, the research was conducted to assess the effect of access to finance on the performance of SMEs in Rwanda. Deeply, the researcher analyzed the determinants of access to finance and the factors of SMEs performance, then the relationship between them was drawn to assess their significance level. To achieve the research objective, the researcher used the explanatory research design and the sample size of 152 respondents was selected from 246 registered SMEs in Muhanga District as target population, by using Yamane’s formula. The researcher also used multistage sampling method for selecting sample size. This study was conducted using quantitative methods. The data were collected using a self-administered questionnaire, analyzed using Statistical Package for Social Sciences and presented in form of tables. Multiple regression used to determine the p-value and the level of significance for this test was 5 %. The statistical Pearson correlation coefficient of 0.891 confirmed that access to finance impact positively the relationship between two variables under study.