Determinants of credit access to small and medium enterprises (smes) in tanzania a case of mbeya city

Abstract

Small and medium enterprises (SMEs) are the main players in the economy of Tanzania and other developing countries. SMEs contribute prominently to the economy through creating more employment opportunities, generating higher production volumes, increasing exports and introducing innovation and entrepreneurship skills. The dynamic role of SMEs in developing countries is like an engines through which the growth objectives of developing countries can be achieved. This study used a sample of 105 SMEs located in various areas of Mbeya city, it is from these SMEs data were obtained by using questionnaires, interview guides and documentary reviews. By using these methods of data collections, primary and secondary data were obtained to assess determinants of credit access and credit size by SMEs in Tanzania. Analysis of data was conducted by running ordered logistic model to assess which factors determine credit access and credit size by SMEs. The study found that credit access and credit size by SMEs are significantly determined by factors like collateral, sales size, business experience, level of education, and form of business ownership. Cross sectional data methodology was used, in this study, future studies can employ panel data designs that can allow to control for unobservable heterogeneity of individual SMEs. Moreover further research is needed to examine with non-parametric statistical techniques, such as with neural networks, the relationships of all the variables that this study examined, as well as to run causality tests, in order to investigate which variable or SMEs characteristic causes the other. For instance, does gender influence ownership of assets whereby ownership in turn influence access to credit?