Challenges of microfinance accessibility by SMEs in Tanzania

Abstract

Abstract This article is based on a research exploring the challenges of microfinance accessibility by SMEs in Tanzania. A survey research methodology is adopted utilizing primary and secondary data from a purposively selected sample of SME operators. Data is collected using questionnaires and interviews which are analysed using SPSS Statistics 17.0. The evidence gathered show that the financial sector has failed to adequately extend microfinance facilities to SMEs due to high transaction costs, lack of collaterals, inadequate skills in developing and managing bankable projects. The study concludes that where default‐risk is perceived to be high, microinsurance must be taken by applicants as collateral. The article recommends initiation of intervention policies, which will uphold sustainability of SMEs and streamline accessibility to microfinance. Finally, the authors look at action‐focused solutions to support and build on the potential of public equity markets to help SMEs access microfinance as an area for further studies. © 2012 Wiley Periodicals, Inc.