Impact of Interest Rates on Business Sustainability among Small and Medium Enterprises (SMEs) in Gasabo District, Rwanda

Asha Umwiza and Osiemo Kengere Athanas
Mount Kigali University, Rwanda
Email: usherumwiza@gmail.com

Abstract: This study examined the associations of liquidity risk, default risk, and customer classification with perceived business sustainability among small and medium enterprises (SMEs) in Gasabo District, Rwanda. A cross-sectional descriptive-correlational study combined questionnaires with interviews and documentary review. The reported target population was 386, with a planned sample of 196; 162 of 175 distributed SME questionnaires were returned (92.6%). Pearson correlations and a multiple regression model were used to analyse questionnaire responses. Liquidity risk (r = .679), default risk (r = .579), and customer classification (r = .545) were positively correlated with perceived sustainability (all p < .01). In the original four-predictor model, liquidity risk (β = .721, p = .002) and customer classification (β = .369, p < .001) had significant adjusted coefficients, whereas default risk did not (β = .074, p = .329). The full model explained 59.8% of variance, but that proportion cannot be attributed to the three focal predictors alone. Severe collinearity affecting liquidity risk and an additional model covariate limits coefficient interpretation. Results support attention to cash-flow planning and transparent borrower assessment, without establishing causal effects or a direct impact of interest rates.