ABSTRACT The research study explored the effect of commercial banks’ interest rates on the performances of SMEs in Makindye East Division, Kampala District. Performance of SMEs was guided by its indicators. And these indictors included; Expansion, profitability and total sales. The specific objectives of the study were; to determine the level of accessibility of credit by SMES from commercial banks, to determine the performance level of SMEs in Makindye East Kampala and lastly to establish the relationship between interest rates and performance of SMEs in Makindye East Kampala. In this study, both quantitative and qualitative data was used and selfadministered questionnaires were adopted during data collection. The sample size of the study was obtained using a non probability sampling techniques and took 80 respondents where 18 were female and 62 were male respondents. The research found out that there is no significant relationship between commercial banks’ interest rates and the performances of SMES in Makindye East Division. This was evidenced from the Sig value being greater than level of significance (0.05). The researcher therefore recommends commercial banks to reduce on their level of interest rates and also reduce on the level of collateral securities to acquire loans. Also, the study recommended the government to engage in setting up policies to reduce on the interest rates among the commercial banks in order to develop SMES and businesses in Makindye East Division, Kampala District.
