A Dissertation Submitted in Partial Fulfilment of the Requirements for Award
of the Degree of Master of Business Administration (MBA-CM) of
Mzumbe University
The growth of Small and Medium Enterprises (SMEs) worldwide always depends on
favourable business environment. Nevertheless, SMEs in Tanzania are threatened by
a number of limitations that hinder their performance. One of the constraints is
exchange rate fluctuation. This study had a main objective which was to assess the
implications of exchange rate fluctuation on the performance of SME’s. In order to
achieve the study objectives, assessment of the effects of foreign exchange rates
fluctuations in the performance of SMEs as well as the effects of inflation rates
fluctuations in the performances of SMEs was conducted. The study also assessed
the mitigation strategies on inflation and exchange rate fluctuation. Descriptive
research design was adopted in this study. The reason behind the selection of the
design was its purpose and the nature of the variables at hand, which needed
qualitative and quantitative analysis methods and the interpretation of views and
perceptions. Findings from the study indicated the negative effect of exchange rate
to business performance. Exchange rate was seen to impact many areas such as the
importation of goods and the payment of trade creditors. The study concludes that,
Unstable exchange rate has negative implication to the performance of SMEs in
Tanzania. Depression of the value of currency which mainly occur in Tanzania and
many developing country cause the decrease in purchasing power in importing
product and also result in rise of product price in internal market. The study
recommends to policy makers to make consideration on exchange rate dynamics
when making monetary policy and fiscal policy.