MJAMR

Debt Financing and Financial Performance of Selected Small and Medium Scale Enterprises in Wakiso District, Uganda

Niwagaba Felix, Irumba Alex


Abstract

This study examined the relationship between debt financing and the financial performance of small and medium enterprises (SMEs) in Wakiso District, Uganda. Wakiso District; the most populous district in Uganda, surrounding Kampala and characterised by a dense concentration of SMEs across manufacturing, trade, services, and agroprocessing — provided an ideal research context for examining debt financing dynamics given the diverse range of SME types, financing needs, and lender relationships present in the district. Drawing on a cross-sectional survey of 178 SME owner-managers, finance managers, and lenders across 84 selected SMEs in Wakiso District, the study employed descriptive statistics, Pearson correlation, multiple linear regression, and SEM path analysis to examine how short-term debt financing, long-term debt financing, and debt cost management influenced SME profitability, liquidity, and growth performance. Descriptive statistics revealed moderate levels of debt financing effectiveness across all dimensions (means 3.24–3.61). Pearson correlation confirmed significant relationships between all debt financing dimensions and financial performance (r = 0.541–0.682, p < .001). Multiple regression demonstrated that the three dimensions collectively explained 59.8% of variance in SME financial performance (R² = 0.598, F = 29.74, p < .001). SEM analysis revealed long-term debt financing as the strongest total effect predictor (total β = 0.467), with debt cost management partially mediating its relationship with performance. Recommendations address debt structure optimisation, interest cost reduction, and financial literacy strengthening for SME owner-managers.

Keywords

Debt Financing SME Financial Performance Short-term Debt Long-term Debt Debt Cost Management Wakiso District SEM Uganda
Metropolitan Journal of Academic Multidisciplinary Research

Cite This Article

Niwagaba Felix & Irumba Alex (2026). Debt Financing and Financial Performance of Selected Small and Medium Scale Enterprises in Wakiso District, Uganda. Metropolitan Journal of Academic Multidisciplinary Research, 5(9). https://journals.miu.ac.ug/pages/article.php?article_id=1898

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