The Role of Financial Institutions on Success of Small and Medium Enterprises in Tanzania.A Case Study Of Dar-Es-Salaam Region

Moshi, Frank Gladstone (2011) The Role of Financial Institutions on Success of Small and Medium Enterprises in Tanzania.A Case Study Of Dar-Es-Salaam Region. Masters thesis, The Open University of Tanzania.

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Abstract

This study aimed at assessing the role of financial institutions on the success of SMEs in the country. Though the success of SMEs have been linked to the accessibility of financial services by various scholars, yet the way financial institutions influence success of SMEs has never been explored. To undertake the study ten financial institutions were involved which included commercial banks, microfinance institutions and SACCOs. A total of 95 SMEs were randomly selected from a population of 93430 SMEs found in Dar es Salaam region. Two sets of questionnaires were constructed one set for SMEs owners and other for the financial institution. The responses of the participants were analyzed using the statistical package for social sciences (SPSS). The study found that financial institutions have little influence on SMEs financing because most of SME owners or managers frequently used retained earnings or profit (self-financing) and funds from relatives/friends to finance their business as a source of finance. The study recommends to financial institutions to rigorously market their services to SMEs which have not subscribed to their services. The study also recommends the relaxation of lending conditions so that SMEs can access loans at affordable interest rates. The study further recommends a future research to be done that shall incorporate a wide range of SMEs, with a bigger sample size.

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