Challenges Facing Small and Medium Enterprises in Accessing Finance: A case of Commercial Banks in Ilala Municipal

Pastory, Almachius Kaiza (2015) Challenges Facing Small and Medium Enterprises in Accessing Finance: A case of Commercial Banks in Ilala Municipal. Masters thesis, The Open University Of Tanzania.

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Abstract

Small and medium-sized enterprises (SMEs) are considered to be one of the principal driving forces in economic development. It is approximated that there are about three million small business in Tanzania. Several factors constrain financial institutions provide loan to SMEs regardless government’s policy and strategies. A descriptive study was conducted to assess SMEs specific factors and commercial Banks specific factors on growth of small and Medium in Ilala Municipal, a total of 215 SMEs and 3 commercial banks found in Ilala were involved in this study. Among the predictors tested in this study revealed that nature of the firm ,education level of SMEs owner, and firm capital were significantly associated with accessing loans from commercial banks in the study area and results from the multivariate regression suggest that nature of the business and current value of the firm have statistically significant contributions to the model for predicting business expansion but the combination of independent variables, nature of the business, education level of the SME owner and current value of the firm were not statistically significant with capital growth outcome, although all the three predicting factors had positive relationship with the capital growth .From this study, it was revealed that commercial banks were the main source of finance for the SMEs, and that regardless provision of the loans to SME, procedures of getting loans for micro enterprises should be regulated to enable more accessing to the capital. Given the good policy, strategy, and vision of the government empowering financial institution it is recommended that the commercial banks to create tailor made and good environment for micro enterprises to access loans.

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