Examining the Link between Debt Management Behavior and Growth Sustainability in Small and Medium-Sized Enterprises

Apollo Okello, Paul Onyango-Delewa and Godfrey Moses Owot

International Journal of Business and Management, 2025, vol. 20, issue 4, 46

Abstract: Small and Medium-sized Enterprises are essential for driving economic growth, generating employment, and promoting innovation worldwide. Despite their importance, SMEs in developing economies, such as Uganda, face challenges related to inadequate debt management practices, financial constraints, and unsustainable growth trends. This research analyzed the effect of lifestyle patterns, religiosity, and financial self-efficacy on the sustainable growth of SMEs in Lira City, Uganda. The study utilized a cross-sectional quantitative research design, informed by the Theory of Planned Behavior, focusing on 311 SME owners and managers who were selected via simple random sampling. Data were collected through structured questionnaires and analyzed with robust regression analysis in Stata 17 to address heteroskedasticity and non-normality issues. The results indicated that the three behavioral factors—lifestyle pattern, religiosity, and financial self-efficacy—exerted positive and statistically significant influences on the sustainability of SME growth. Financial self-efficacy was identified as the most significant predictor, suggesting that SME owners possessing greater confidence in financial management attained superior business sustainability results. Religiosity encouraged ethical borrowing and responsible debt management, whereas lifestyle patterns facilitated prudent spending and resource allocation. This study enhances the current literature by incorporating behavioral dimensions into debt management practices, providing valuable insights for policymakers, financial institutions, and development agencies. The research advocates for the integration of behavioral finance modules in SME training, the evaluation of behavioral traits in credit assessment, and the encouragement of ethical financial practices via community and religious involvement. Future research should investigate further behavioral factors through longitudinal and mixed-method approaches to improve comprehension of SME financial sustainability across various contexts.

Date: 2025
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