The Challenges and Prospects of Small and Medium Enterprises (SMEs) in Accessing Credit Facility: A Case Study of Agricultural Inputs Sellers and Distributors in Arusha City

Lyimo, Sarah Ernest (2014) The Challenges and Prospects of Small and Medium Enterprises (SMEs) in Accessing Credit Facility: A Case Study of Agricultural Inputs Sellers and Distributors in Arusha City. Masters thesis, The Open University of Tanzania.

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Abstract

This study examined challenges and prospects which sellers and distributors of agricultural input in the SMEs sampled from the City of Arusha face in accessing credit from financial institutions. The study aimed to attain three objectives, namely: To assess the nature of the SMEs in which the sellers and distributors of agricultural input belonged, identify the challenges faced in accessing financial credit and lastly to identify the strategies used in accessing financial credit from financial institutions. Both purposive and random sampling techniques were used to obtain 100 respondents from SMEs. The instruments of data collection were questionnaires and checklists. The findings from the study indicated a 50% of the SMEs dealing with agricultural input in Arusha had registered as the Family Owned Businesses. Moreover, the retail traders were many (constituting 62%) of the SMEs studied. Data revealed that 70% of the total respondents faced the challenge of lack of collateral/security. Moreover, the SMEs operating in Arusha city are skewed more towards the internal sources of funding. The study concluded that the constraints faced in accessing credit from financial institutions inhibit the growth of SMEs. There study recommends that there is a need of reinforcing the Credit Reporting Act to regulate and focus on how to flexibility to accommodate SMEs. Furthermore, the government has to provide incentives and subsidy for the banks with outstanding records of lending to SMEs. It is also recommended that the Ministry of Industry and Trade need to intensify campaigns through the mass media aimed at educating the general public in Tanzania about the potentials of SMEs to the national development.

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