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This research work investigated the role of micro-financing on Micro and Small Enterprises (MSEs) in Tanzania. The study examined how micro-finance activities and features such as group membership, pre-loan training, loan size, technical and managerial training, among others, impact on the survival, growth, productivity and performance of Micro and Small Enterprises in Tanzania. Microfinance emerged as a noble substitute for informal credit and an effective and Powerful instrument for poverty reduction among people, who are economically inactive, but financially constrained and vulnerable in various countries. Microfinance covers a broad range of financial services including loans, deposits and payment services and insurance to the poor and low-income households and their micro enterprises. Microfinance institutions have shown a significant contribution towards the poor in rural, semi urban or urban areas for enabling them to raise their income level and living standards in various countries like Tanzania. The research also indicates that MFIs have a positive effect on the growth of SMEs, some of the critical contributions of MFIs include; greater access to credit, savings enhancement and provision of business financial and managerial training. Irrespective of the contributions of MFIs to SMEs, there are challenges that affect their operations of both SMEs and MFIs. The major challenge faced by SMEs is the cumbersome process associated with accessing credit of which collateral security and lack of education among the borrowers are major setback. The MFIs on the other hand, face some challenges relating to credit misappropriation and non-disclosure of the relevant facts of their businesses. In the final analysis, the research clearly reveals that MFIs have a positive effect on the growth SMEs. In other to enhance a sustained and accelerated growth in the operations of SMEs credits should be client-oriented and not product- oriented. Proper and extensive monitoring activities should be provided for clients who are granted loans. |
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