Factors That Affect Trade Credit Among Manufacturing Firms In Uganda.

Introduction

This chapter covers historical, theoretical, conceptual plus contextual background to the study, statement of the problem, purpose of the study, objectives of the study, hypotheses, conceptual framework, scope of the study, geographical scope and significance of the study. Trade credit is an agreement involving purchase of goods and services without immediate payment. This practice is used by all business entities in both developed and developing nations (Leire & Cowton, 2009, Rodri’guez, 2008). Although many studies have examined trade credit practices from the financing (Schwartz, 1974, Salima, 2007, Altunok, 2011, Cunat, 2012, Santiago, Fenandez and Udell, 2012), price discrimination (Meltzer, 1960, Schwartz and Whitcomb, 1979, Altunok, 2011, Cunat, 2012), and transaction cost perspectives (Williamson, 1996, Ferries, 1981, Summers & Wilson, 1997, Kevin, 2013, Cunat, 2012), none has introduced the mediating variable of repayment behavior. The fore going has created a knowledge gap which this study is going to address. This study also aims to achieve better trade credit practice which can enhance the country’s economic development. Repayment behavior plays a critical role in enabling trade credit accessibility by suppliers and this study is aimed at achieving this. More insight is required to find out why trade credit use is on a reducing trend in Uganda. Financing, Price discrimination and Transaction cost are the three key determinants of trade credit that are to be examined in the study.