Impact of microfinance services on financial performance of SMES in Kathmandu

Abstract

The objective of this study is to explore the impact of Microfinance Services on the Financial Performance of SMEs in Kathmandu. This study uses both qualitative and quantitative methods within a descriptive and causal research design. This study also utilized findings from various prior research to establish a strong conceptual framework. The data were collected through questionnaire method from the respondents who use SMEs services in Kathmandu Valley of Nepal. The analysis of questionnaire data was conducted using the Statistical Package for the Social Sciences (SPSS), facilitating a comprehensive examination of the relationships between distinct psychological factors and entrepreneurial success. The variables used in this study include access to credit, saving mobilization, role modelling, financial skills and training. Correlation analysis of the data shows the positive relation between these independent variables and the dependent aligning with empirical evidence found in prior research. Regression analysis highlighted the collective and significant contribution of these variables such as access to credit, saving mobilization, Financial skill training, Role modeling in illustrating variations in performance of SMEs. The findings indicate that access to microfinance services plays a vital role in enhancing the financial performance of SMEs in Kathmandu. The findings revealed a significant positive correlation between access to credit and financial performance which explain that SMEs with greater access to credit tend to exhibit better financial performance outcomes. This underscores the importance of microfinance services in facilitating business growth and sustainability. Saving mobilization emerged as a key determinant of financial performance, with a strong positive correlation observed between saving mobilization and business success. SMEs that effectively mobilize savings are better positioned to invest in growth opportunities and manage financial risks. Key words: Access to Credit, Saving Mobilization, Role Modelling, Financial Skills and Training, Financial Performance of SMEs