Abstract:
The study was intended to assess the challenges facing micro, small and medium enterprises
(MSMEs) in accessing financial credits in Arusha city, in the United Republic of Tanzania. The
study assesses the causative factors that foster limited access to loans by MSMEs from
financial institutions by focusing on three independent variables: characteristics of MSMEs,
characteristics of MSME owners and the Financial system within which the MSMEs operate.
The study employed a descriptive research design and a mixed (qualitative and quantitative)
research approach. Data was collected from 360 MSME owners (or managers) sampled from
a population of 3,650 MSME owners (or managers) in Arusha city. The collected data was
processed using SPSS software to generate descriptive statistics and present the findings.
The findings of the study revealed that MSME’s characteristics, MSME owners’ characteristics
and the features of the financial system have significant contribution to catalysing the problem
of inaccessibility of loans to MSMEs in Arusha city. Based on the findings of this study, the age
size of the firm and the type of industry in which the firms belong to were factors linked to the
characteristics of MSMEs that contribute to the magnitude of the problem in the study area. On
the other hand, demographic characteristics (such as gender, age and level of education) and
management experience were factors linked to the characteristics of MSME owners that also
contribute to the magnitude of the problem area. Similarly, the features of the financial system
including the present development policies, support services and systems’ infrastructure were
also found to present significant limitations towards accessibility to loans by MSMEs in the
study area. Among others, the study recommends formation of specialized financial institutions,
deliberate support and development policies and establishment proper financial system
infrastructure.
