The Relevancy of Working Capital Management Practices and Financial Expertise in Driving Business Success for Micro, Small, and Medium Enterprises (MSMEs) in Nakawa Division, Kampala District, Uganda


Authors : Kaggwa Andrew; Allan Daniel Bunyenyezi

Volume/Issue : Volume 9 - 2024, Issue 12 - December

Google Scholar : https://tinyurl.com/bdc8u4nt

Scribd : https://tinyurl.com/mswscacv

DOI : https://doi.org/10.5281/zenodo.14631924

Abstract : The objective of this investigation was to examine the connection between working capital management, financial-expertise, and the business success of Micro, small, and medium-sized enterprises (MSMEs) in Nakawa Divisio, Kampalan. The study adopted a quantitative methodology to produce numerical data and applied causal-comparative and correlational designs. The analysis focused on MSMEs, with business owners serving as the primary respondents. About 132 questionnaires were distributed, and 130 were completed and reverted, yielding a high response rate of 98.48%, which was adequate for the study’s conclusions. Most of respondents were female, married, and actively involved in business activities, with an educational background. Most MSMEs were registered but employed fewer than five workers. Analytical tools such as Pearson correlation and linear regression were utilized for the data analysis. The findings revealed that financial expertise significantly moderates the association between working capital management (specifically inventory management) and business success. The results highlight that improving financial skills such as debt management, bookkeeping, and budgeting through education, training, and collaboration with financial institutions enhances the ability of MSME owners to manage working capital efficiently, thereby boosting business-success. The study recommended that MSME owners in Nakawa Division prioritize developing their financial expertise through training sessions, workshops, and partnerships with financial organizations or business development agencies. Additionally, future research could delve into other factors influencing MSME success, such as marketing strategies, innovation potential, or access to modern technologies.

Keywords : Working Capital Management, Financial Expertise, Business Success.

References :

  1. Abuzayed, B. (2012). Working capital management and firms’ performance in emerging markets: the case of Jordan. International Journal of Managerial Finance.
  2. Ahangar, N. (2020). Narrative Literature Review on Target Cash Conversion Cycle, Speed of Adjustment and Determinants. . Library Philosophy and Practice,, 1A-11.
  3. Ahmad, B., Ahmed, I., & Samim, M. M. (2018). Working capital management efficiency and corporate governance in manufacturing sector of Pakistan. . European Online Journal of Natural and Social Sciences, 7(1), pp-67.
  4. Ali, R. A., Abubakar, A., & Naalah, M. N. (2017). The effect of working capital management on SMEs profitability in Malaysia. . Polish Journal of Management Studies, 16.
  5. Altawalbeh, M. A. (2020). impact of working capital management on financial performance: evidence from Jordan. . International Journal of Academic Research in Accounting, Finance, and Management Sciences, 10(1), , 308-315.
  6. Aribawa, D. (2016). Pengaruh literasi keuangan terhadap kinerja dan keberlangsungan UMKM di Jawa Tengah. Jurnal Siasat Bisnis, 20(1), . 1-13.
  7. Barney, J. B. (2001). Resource-based theories of competitive advantage: A ten-year retrospective on the resource-based view. Journal of management, 27(6), , 643-650.
  8. BOU. (2018). Bank of Uganda Annual report .
  9. Chepkemoi, M., Patrick, E., & Njoroge, C. (2017). The Effects of Financial Literacy Training On Business Profitability in Coastal Region: A Case of Kwale County SMEs. Strategic Journals Of Business and Change Management, 4(3), , 684–703.
  10. Chepngetich, P. (2016). Effect of financial literacy and performance SMEs. Evidence from Kenya. American Based Research Journal, 5(11), 2304-7151.
  11. Chepngetich, P. (2016). Effect of financial literacy and performance SMEs. Evidence from Kenya. Evidence from Kenya.
  12. Cooper, D. R., Schindler, P. S., & Sun, J. (2006). Business research methods (Vol. 9, pp. 1-744). New York: Mcgraw-hill.
  13. Corrales, D. C., Corrales, J. C., & Ledezma, A. (2018). How to address the data quality issues in regression models: a guided process for data cleaning. Symmetry, 10(4), 99.
  14. Cranimar, M., & John, R. (2021). Working Capital Management and Financial Performance of Private Hospitals in Western Uganda: The Mediating Effect of Competitive Advantage. International Journal of Business Strategies, 6(1), 12-23.
  15. Creswell, J. W. (2014). Research Design: Qualitative, Quantitative, & Mixed Methods. Approaches, International Etudent Edition, CA. (4th Ed.). Thousand Oaks. California: Sage.
  16. Dahmen, P., & Rodriguez, E. (2014). Financial Literacy and the Success of Small Businesses: An Observation from a Small Business Development Center. Numeracy: Advancing Education in Quantitative Literacy, 7(1), 1-12.
  17. Danns, D. E., & Danns, G. K. (2017). THE CREATION OF FINANCIAL LITERACY PROGRAMS IN SMALL DEVELOPING COUNTRIES: AN INSTITUTIONAL MODEL APPROACH. . Journal of International Business Disciplines, 12(2).
  18. Eisenhardt, K. M., & Martin, J. A. (2000). Dynamic capabilities: what are they?. Strategic management journal, 21(10‐11). 1105-1121.
  19. Elf, P., Werner, A., & Black, S. (2022). Advancing the circular economy through dynamic capabilities and extended customer engagement: Insights from small sustainable fashion enterprises in the UK. Business Strategy and the Environment, 31(6),. 2682-2699.
  20. Ensari, S. M., & Karabay, E. M. (2018). What helps to make SMEssuccessful in global markets? Procedia - Social and Behavioral Sciences,150(4), 192 – 201.
  21. Fatoki, O. (2014). Enhancing access to external finance for new micro-enterprises in South Africa. Journal of Economics, 5(1), 1-6.
  22. Global Entrepreneurship Monitor report. (2015). India Report .
  23. Helfat, C. E., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D., & Winter, S. G. (2009). Dynamic capabilities: Understanding strategic change in organizations. John Wiley & Sons.
  24. Ibrahim, K. Y., Usaini, M., & Elijah, S. (2021). Working capital management and business success . Nigerian Journal of Marketing (NJM) Vol, 7(1).
  25. Kaawaase, T. K., Bananuka, J., Kwizina, T. P., & Nabaweesi, J. (2019). Intellectual capital and performance of small and medium audit practices: The interactive effects of professionalism. . Journal of Accounting in Emerging Economies.
  26. Kakuru, M. (2015). Financing Small and Medium Scale Enterprises (SMEs); Uganda’s experience. Bank of Uganda Working Paper, WP/03/01.
  27. Kyambadde, J. B. (2015). Trustworthiness as a Source of Competitive Advantage, Strategic Management Journal, 15(S1). 175-190.
  28. Malik, Z. U., & Iqbal, A. (2012). Affect of Working Capital Management on Firms Profitability in Sugar Industry of Pakistan.
  29. Mberia, C. &. (2021). Influence of budgeting and debt management literacy training on financial performance of equity bank trained women self help groups in Machakos town, Kenya. . International Journal of Entrepreneurship and Project Management 6(1), , 1-11.
  30. Mberia, C., & Wachira, K. (n.d.). Influence of budgeting and debt management literacy training on financial performance of equity bank trained women self help groups in Machakos town, Kenya. International Journal of Entrepreneurship and Project Management Project Management, 6(1), , 1-11.
  31. Ministry of Finance Planning and Economic Development. (2015).
  32. Mugenda, O., & Mugenda, A. (2003). Research methods: Quantitative and. Qualitative. Approaches. Nairobi; African Centre for Technology Studies.
  33. NAJJINGO, E. (2018). NETWORK RELATIONSHIPS, MARKETING CAPABILITIES AND PERFORMANCE OF MICRO, SMALL AND MEDIUM ENTERPRISES WITHIN URBAN AREAS IN UGANDA: A CASE OF NAKAWA DIVISON.
  34. Nakawa MSMEs Register. (2016).
  35. Neuman, W. L., & Robson, K. (2014). Basics of social research. Toronto: Pearson Canada.
  36. Njoroge, R. M. (2013). Relationship between financial literacy and entrepreneurial success in Nairobi County Kenya (Doctoral dissertation, University of Nairobi).
  37. Nkundabanyanga, S. K. (2016). Board governance, intellectual capital and firm performance: Importance of multiplicative effects. . Journal of Economic and Administrative Sciences.
  38. Nuwamanya, M. (2021). Financial Literacy, Working Capital Management and Business success  of Small and Medium Enterprises in Kampala District (Doctoral dissertation, Makerere University Business School).
  39. NUWAMANYA, M. (2021). FINANCIAL LITERACY, WORKING CAPITAL MANAGEMENT AND BUSINESS SUCCESS  OF SMALL AND MEDIUM ENTERPRISES IN KAMPALA DISTRICT. KAMPALA: A DISSERTATION.
  40. Nyabwanga, R. N., & Ojera, P. (2012). Inventory management practices and business success  for small-scale enterprises in Kenya. KCA Journal of Business Management, 4(1), 11-28.
  41. Omar, M. S., & Ronald, M. O. Analysis of Impacts of Working Capital Management Practices on Financial Performance of Small and Medium Enterprises (Juakali) in Mandera County, Kenya.
  42. Onodje, M. A. (2014). Working capital management and performance of selected Nigerian manufacturing companies. . Global Journal of Management and Business Research, 14(3), , 41-49.
  43. Osunsan, Kinyatta, S., Baliruno, J. B., & Kibirige, R. (2015). Age and performance of small business enterprises in Kampala, Uganda. International Journal of Social Science and Humanities Research, 3(1), 189-196.
  44. Pandey, A., & Gupta, R. (2018). Entrepreneur’s performance and financial literacy–A critical review. International Journal of Management Studies, 5(3), 1-14.
  45. Pedraza, J. M. (2021). The Micro, Small, and Medium-Sized Enterprises and Its Role in the Economic Development of a Country.
  46. PSFU. (2019). Private Sector Foundation Uganda.
  47. Rosyadah, K., Mus, A. R., & Semmaila, B. (2017). The Relevance of Working Capital, Financial Literacy and Financial Inclusion on Financial Performance and Sustainability of Micro, Small and Medium-Sized Enterprises (MSMEs).
  48. Rosyadah, K., Mus, A. R., Semmaila, B., & Chalid, L. (2022). The Relevance of Working Capital, Financial Literacy and Financial Inclusion on Financial Performance and Sustainability of Micro, Small and Medium-Sized Enterprises (MSMEs). American Journal of Humanities and Social Sciences Research (AJHSSR), 4, 203-216.
  49. Sah, G. G. (2022). Influence of account receivable management practices on the performance of small and medium scale enterprises. Technium Soc. Sci. J., 32, 376.
  50. Sensini, L. (2020). Working capital management and performance: evidence from Italian SME’s. International Journal of Business Management and Economic Research (IJBMER), 11(2), 1749-1755.
  51. Sharmilee, S., & Muhammad, H. (2016). Factors affecting the performance of small and medium enterprises in KwaZulu-Natal, South Africa’.Problems and Perspectives in Management (open-access). Vol.14, pp. 2-2.
  52. Siekei, J., Wagoki, J., & Kalio, A. (2013). An assessment of the role of financial literacy on performance of small and micro enterprises: Case of Equity Group Foundation training program on SMEs in Njoro District, Kenya. Business & Applied Sciences, 1(7).
  53. Sucuahi, W. T. (2013). Determinants of financial literacy of micro entrepreneurs in Davao City. International Journal of Accounting Research, 42(826),, 1-8.
  54. UBOS. (2017). Annual Report Uganda Bureau of Statistics.
  55. UBOS Report. (2019).
  56. Uganda Bureau of Statistics (UBOS). (2018). A report on the Ugandan Business Register and performance. Uganda Bureau of Statistics (UBOS), Kampala, Uganda.
  57. UGANDA MICRO, SMALL AND MEDIUM ENTERPRISE (MSME) POLICY. (2015).
  58. UIA. (2017). Uganda Investment Authoriy Annual Report.
  59. UIA. (2019). Uganda Investment Authority.
  60. Wernerfelt, B. (2014). On the role of the RBV in marketing. Journal of the Academy of Marketing Science, 42(1), . 22-23.
  61. World Bank Report. (2020). Facilitating SME financing through improved credit Reporting. Report of International committee on credit reporting, charged by World Bank.
  62. Ying, Q., Hassan, H., & Ahmad, H. (2019). The role of a manager’s intangible capabilities in resource acquisition and sustainable competitive performance. Sustainability, 11(2), 527.

The objective of this investigation was to examine the connection between working capital management, financial-expertise, and the business success of Micro, small, and medium-sized enterprises (MSMEs) in Nakawa Divisio, Kampalan. The study adopted a quantitative methodology to produce numerical data and applied causal-comparative and correlational designs. The analysis focused on MSMEs, with business owners serving as the primary respondents. About 132 questionnaires were distributed, and 130 were completed and reverted, yielding a high response rate of 98.48%, which was adequate for the study’s conclusions. Most of respondents were female, married, and actively involved in business activities, with an educational background. Most MSMEs were registered but employed fewer than five workers. Analytical tools such as Pearson correlation and linear regression were utilized for the data analysis. The findings revealed that financial expertise significantly moderates the association between working capital management (specifically inventory management) and business success. The results highlight that improving financial skills such as debt management, bookkeeping, and budgeting through education, training, and collaboration with financial institutions enhances the ability of MSME owners to manage working capital efficiently, thereby boosting business-success. The study recommended that MSME owners in Nakawa Division prioritize developing their financial expertise through training sessions, workshops, and partnerships with financial organizations or business development agencies. Additionally, future research could delve into other factors influencing MSME success, such as marketing strategies, innovation potential, or access to modern technologies.

Keywords : Working Capital Management, Financial Expertise, Business Success.

Never miss an update from Papermashup

Get notified about the latest tutorials and downloads.

Subscribe by Email

Get alerts directly into your inbox after each post and stay updated.
Subscribe
OR

Subscribe by RSS

Add our RSS to your feedreader to get regular updates from us.
Subscribe