An evaluation of the factors hindering SMES from accessing the letter of credit facility issued by commercial banks in Tanzania: a case of CRDB bank PLC

International trade is inevitable because no any nation is self-sufficient in terms of goods and services it produces within its borders. But International Trade involves risks; exporters run the risk of buyers failing to pay for goods, while importers may risk paying but never receiving anything. The letter of credit mitigates risks associated with cross border business because it secures the intended beneficiary against the loss resulting from the failure of the counterpart to perform a contractual obligation. In Tanzania, only few SMEs use the letter of credit unlike their counterparts, big firms. An examination of whether product knowledge gaps, lack of collateral securities, bank charges on LC, bureaucracy and English language are contributory factors for an LC low usage rate by SMEs. CRDB Bank Plc was used as the case study because the bank had been educating SMEs on how to access loan facilities. Collected data were analyzed using SPSS and the study confirmed that LC existence knowledge gap, collateral securities, bank charges, bureaucracy and English language are responsible for LC low usage rate by SMEs. Basing on the research findings, it is recommended that banks should aggressively market an LC to SMEs, lower LC charges and stop unnecessary bureaucracy. As for collateral securities, the Government is advised empower its people to own surveyed landed properties which qualify as collateral securities for the loans.