Abstract:
This study was set to assess the access to finance and SMEs growth in Dodoma
municipality. Specific objectives were to determine sources of SMEs finances,
factors that hinder SMEs to access finance, factors that hinder SMEs growth and the
link between SMEs growth and access to finance. The sample size of the study was 120 comprising 30 participants from Uhuru,
Majengo, Chamwino and Mwangaza ward. Purposive and random sampling
techniques were used to draw the sample. Cross-sectional survey design was used.
Since the study adopted both qualitative and quantitative research design, interview
and questionnaires were used as data collection tools. Data were analyzed by (SPSS)
using regression analysis tool. It was found that 51% the majority of SMEs relied on internal sources of financing,
35% both source of finance and 14% the external source therefore, access to external
finance was still a challenge.
Also the results of the analysis show that lack of information with
(beta=0.189,P=0.048 and t-value=2.001) and administrative side of loan being
demanding with (beta=0.248,P=0.049 and t-value=1.991) had statistically significant
effect toward access to finance. Insufficient collateral, interest rate too high, banks
requesting too much information and loan granting procedures being too long were
found insignificant factors. Moreover management skills and keeping of business
records with (beta=0.202,t-value=2.034 and P=0.044) was the only factors that
significantly related with SMEs growth, other factors such as competitions, finding
customers, cost of running and government regulations were regarded as
insignificant and lastly SMEs growth was found not statistically significant with
access to finance at (P=0.065,beta=0.169 and t-value 1.861) so the hypothesis was
rejected. The study concludes that accessibility of external finance is an important factor for
the different stages of growth for SMEs. Lack of management skills and poor
keeping of business records acted as barriers for their growth. These can be removed
if the SMEs have reliable financing sources. Furthermore the study recommends that
competition is a challenge to the SMEs does not mean that business environment is
not competitive
