Effect of Commercial Bank Services on Performance of Small and Medium Enterprises in Gasabo District, Rwanda

Ineza Kurandere Ange Claire Darlene, Tarus Thomas
University of Kigali
https://orcid.org/0009-0003-9590-3770
Email: angedarlene.ineza@gmail.com

Abstract: The general objective of this study was to assess the effect of commercial bank services on the performance of Small and Medium Enterprises in Rwanda. The study was guided by Pecking Order Theory, Financial Intermediation Theory and Resource-Based View. The study adopted descriptive and correctional research design. The study population of 1752 respondents, comprising SME business owners, was examined using a sample size of 326 respondents determined through Slovin’s formula. Data was collected using questionnaires, Quantitative data was analysed using SPSS through descriptive statistics, Pearson correlation, and multiple regression analysis to determine how loan services, saving services, and financial literacy services predict SME performance. The unstandardized coefficient for loan services is 0.175, indicating that a one-unit increase in loan services results in a 0.175-unit increase in performance of SMEs (β = 0.175, t = 5.645, p = 0.000). The unstandardized coefficient for saving services is 0.556, indicating that a one-unit increase in saving services results in a 0.556-unit increase in SME performance (β = 0.556, t = 16.353, p = 0.000). The unstandardized coefficient for financial literacy services is 0.229, indicating that a one-unit increase in financial literacy services results in a 0.229-unit increase in SME performance (β = 0.229, t = 7.897, p = 0.000). Commercial bank services significantly influence the performance of small and medium enterprises through various financial and educational channels. The study recommended that commercial banks, government institutions, SME owners, and financial service providers strengthen enterprise performance through designing flexible loan products.