The Role of Financial Institutions on the Growth of Small and Medium Enterprises: A Case Study of Iringa Municipal Council

Anania, Nsajigwa C. (2019) The Role of Financial Institutions on the Growth of Small and Medium Enterprises: A Case Study of Iringa Municipal Council. Masters thesis, The Open University of Tanzania.

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Abstract

This study was conducted to assess the role of financial institutions on the growth of small and medium enterprises for the case study of Iringa town. The study assessed the impact and influence of financial institutions on boosting the economy towards industrializations, SMEs is considered to be a significant upcoming sector for economic growth in line with phase 5 government theme of Tanzania industrialization policy”. In the process of assessing the role played by the financial institutions on the growth of small and medium enterprises technical tools like linear regression, descriptive statistics etc. were used for analysing data collected. Data was collected from SMEs business owners and employees in Iringa those resides around industrial area near Ipogolo and SIDO, and also data were collected from SME’s owners and employees located in Iringa town and bank officers responsible for SME’s loans that makes up a total of 67 respondents. In the study it was found that the financial institutions plays a great role on the growth of SMEs, that there is a positive relationship of 0.65 of the bank loans to investment and also the regression has shown that the bank loans contributes to 72.9 percent. Therefore in view of the study results, it concludes that financial institutions play a key role on the growth of SMEs as the theory of capital structure suggests, hence therefore recommended that government and other consultancy units take a strategic initiative and ensure entrepreneurship education programmes and financial policies are reviewed to meet the needs of SMEs. The implications of this study is improve the existing financial policies to accommodate SMEs needs, to be used by other researcher of related area of study, to be used by non-governmental organizations and consultancy firms so that they can offer appropriate services which impacts growth of SMEs.

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