Regulatory Environment as a Moderating Mechanism in the Relationship between SACCO Practices and SME Performance

Small and Medium Enterprises (SMEs) play a critical role in employment generation, poverty reduction, and local economic development in Uganda. However, many SMEs continue to experience operational instability, limited growth, and low enterprise sustainability despite increasing access to cooperative financial services through Savings and Credit Cooperative Organizations (SACCOs). Existing studies have largely focused on the direct effects of SACCO practices on SME performance while giving limited attention to the moderating role of the regulatory environment. This study therefore examined the moderating effect of the regulatory environment on the relationship between SACCO practices and SME performance in Kabale District, Uganda. The study adopted a convergent parallel mixed-methods research design integrating quantitative and qualitative approaches. Quantitative data were collected from 336 SME operators using structured questionnaires and analyzed using descriptive statistics, Pearson correlation, hierarchical regression, moderation analysis, and Structural Equation Modeling (SEM). Qualitative data were collected through interviews with SME owners, SACCO staff, and local stakeholders and analyzed thematically. The findings revealed that SACCO practices had a strong positive and statistically significant effect on SME performance (β = 0.690, p < 0.001), while the regulatory environment demonstrated a strong positive correlation with SME performance (r = 0.740, p < 0.01). However, the direct independent effect of the regulatory environment on SME performance was statistically insignificant (β = 0.002, p = 0.950). Moderation analysis confirmed a significant interaction effect between SACCO practices and regulatory environment (β = −0.124, p < 0.001), indicating that SACCO practices become more important under weaker regulatory conditions. The study concludes that the regulatory environment primarily shapes how effectively SACCO practices translate into enterprise outcomes

SACCO practices; regulatory environment; SME performance; moderation effect; cooperative finance; financial intermediation; Uganda; institutional theory; credit extension; SME sustainability

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