Constraints of Accessing Debt Financing from Commercial Banks among Small and Medium Enterprises in Tanzania: A Literature Review
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College of Business Education
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Elsewhere in the world including Tanzania, Small and Medium Enterprises (SMEs) have been constrained with difficulties to access debt finance from commercial banks (CBs). This paper examines the critical constraints facing SMEs to access debt finance from FIs in Tanzania.Variables such as lack of collateral, low value of collateral, high interest rate, unavailability of loan information, low risk taking propensity, poor saving habits, bureaucratic loan procedures, business informality, poor repayment habits and corruption among CBs’ employees were measured using quantitative approach. Twelve (12) up-to-date related literatures (2011-2015) were intensively reviewed to extract the constraints which appear most frequently. Percentages and frequencies of ten (10) studied variables were computed and presented using a table and bar chart. The findings indicate that lack of collateral, low value of collateral, low risk-taking propensity, poor saving habits and high interest rates are significant constraints for ease access of debt finance from CBs. The study recommends that such challenges need to be curbed by policy makers by harmonizing lending schemes of all CBs and re-engineering training programmes in order to enable SMEs to access credit.
Keywords
Debt Financing, Small and Medium Enterprises, Commercial Banks, Challenges, Tanzani