The impact of commercial banks and mfi loans to SMEs

This Research is primarily concerned with the evaluation of the impact of loans offered by commercial banks and MFls on the economic development of SMEs in Tanzania with particular focus on Arusha region. The motive was to provide empirical support for policy formulation, implementation and rectification with regard to Banks and MFIs avowed commitment to SMEs development whilst contributing to the limited body of knowledge on the impact of loans to specific regions of Tanzania. Both quantitative and qualitative research approaches complimented each other. Case study research design of descriptive nature was used in undertaking this research work. Questionnaires, interviews and documentary review were the tools of data collection. Five aspects that were analysed in this study included loans impact on market share, sales, profit, business value, and loan size on repeated borrowing. In most of SMEs, these aspects increased by more than 80% , with the exception of loan size on repeated borrowing which had a 50% increase. Many SMEs did not experience increase in loan sizes on repeated borrowing due to unsatisfactory business performance. Banks and MFI officers have to be more familiar with SMEs they serve than they currently do to be able to assist them when they face difficulties in utilizing and servicing their loans or when they need business advices.