A Dissertation Submitted in Partial Fulfillment of the Requirements
for Award of the Degree of Masters of Business Administration in Corporate
Management (CM) of Mzumbe University
This study was carried out to examine effect of loan interest rates on SMEs‟
performance and growth with focus to customers who receives Vision Funds‟ loan
services Tanga branch. Data for the study was collected from 83 respondents using
structured questionnaire. Both qualitative and quantitative methods were used to
analyze the data. The result of the study has revealed loan interest rates to have
effect on SMEs‟ performance and growth; which is presented by majority 68.7
percent who had yes response. This particular response is further supported by 44.6
percent who reported to experience slow growth of business capital and 39.8 percent
who responded to have continued operating on less profit respectively. However, a
slow growth of business capital is explained as the decision of loan seeker opting to
take small loan amount from the fear of paying more money charged on interest rate.
Nevertheless, price fluctuation, business seasonality and economic hardship were
emerged other factors challenged their business performance.
Analysis has revealed growth of business capital, creation of business assets and
increase of income. This improvement has been an opportunity to open up new
business which is observed by 47 percent. Moreover, an experience of 13 years in
microfinance services, the charged interest rate has been relatively high compared to
other loan providers and no change (36 percent annually has been maintained) is
being effected despite the need to improve loan services. All in all, however, loans
services remains facilitative to business operation as it open up opportunities/doors
for self employment.
Loan services have been helpful. Business capital has increased, new businesses
were established, and foremost, the capacity to attain social and economic services
provision to families has improved. It was learnt that, clients have had receiving
multiple loans (loaning among institutions) where it was so challenging in paying
back the granted loan. Therefore, a similar study should be undertaken in other areas
to ascertain the extent of applicability of the findings of this study.