The role of community banks in small businesses formation and development: The Case of Mufindi District –Iringa

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University of Dar es Salaam
Availability of financial resources has been said to be on an important factor on small businesses formation and development. Many potential entrepreneurs who are willing and capable of starting a business are not in a position to do so because of insufficient capital to start and expand a business. Insufficient capital to small businesses is due to the reluctance of commercial banks and other microfinance institution (MFIs) to lend to the sector largely because of the associated risks and transaction costs. This hinders both small businesses formation and development. Community Based Banks (CBBs) with rural presence were expected to fill the financing gap left by commercial banks and other MFIs, which were not well developed in Mufindi. The study aims at assessing the role of Mufindi Commercial Bank (MuCoBa) in small businesses formation and development in Mufindi district. Data was collected using structured questionnaires, which were distributed to it sample of 100 small business owners. A rank of some factors for starting a business showed credit/capital availability as still a number one problem in Mufindi, and it was concluded that credit/capital availability is a necessary condition though not sufficient for starting a business. This implies that encouraging businesses to form may not necessarily mean that one has to provide start-up capital. Apart from credit, businesses training and education to let people know their potentials and resources they possess could be equally important. This is one of the tasks MuCoBa has been doing to promote small businesses formation and development. It is recommended that the government should enhance the capacity to institutions providing training to small businesses. As for further research a comparative study between businesses receiving loans against ones not receiving loans, and the assessment of the effectiveness of group lending model and group sizes are recommended.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF HG2039.T34M57)
Banks and banking, Small business, Economic development, Mufindi (District), Iringa Region
Mpogole, H. (2006) The role of community banks in small businesses formation and development: The Case of Mufindi District –Iringa, Master dissertation, University of Dar es Salaam. Dar es Salaam.