SMES Access to Financial Services: Tanzanian Bankers' Eye
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Date
2012
Authors
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Journal ISSN
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Publisher
David Publishing
Abstract
This paper reports Tanzanian bankers’ reasons for not giving SMEs the amount they request as loans to finance their
businesses. Open ended interviews were used to collect primary data from eight interviews in six commercial banks
that serve SMEs and which have been in operation for more than five years. Secondary data was obtained from
different documents like World Bank reports, brochures and websites of visited banks to mention the few. Findings
show that sectors which are perceived as too risky by banks, poor documentation by borrowers which make banks
unable to assess their creditworthiness, lack of understanding by SMEs themselves as to why they are doing
businesses they do, lack or very limited knowledge on financial management by SMEs, lack of awareness of different
products offered by different banks, stagnant businesses as well as lack of proper securitiries to cover their loans are
reasons behind banks reluctant to provide loans to SMEs. Findings clearly show that it is still difficult for new SMEs
to access finance from banks in Tanzania. It is critical for existing SMEs to put their houses in order to the level that is
acceptable by banks if they need to approach banks for loans. Banks in Tanzania need to review their policies on the
maximum amount of loans to SMEs to reflect the market demands. At the moment, new SMEs should not have much
hope of getting finance assistance from most banks. Further, training institutions should continue educating SMEs on
relevant aspect that are important to lenders and lastly, the government should consider providing guarantee to SMEs
sectors that are perceived as too risky by banks just like the ongoing initiatives in the agriculture sector.
Description
Keywords
SMEs’ financing, Commercial banks, Tanzania
Citation
Mori, N. and Richard, E., 2012. SMES Access to Financial Services: Tanzanian Bankers' Eye. Chinese Business Review, 11(2), pp.217-223.