Constraints to credit access by new small and medium enterprises (SMES) from financial institutions (FIS) in Tanzania: a case study of Dar es Salaam

The primary objective of this study was to investigate the constraints to credit access by the new Small and Medium Enterprises (SMEs) from Financial Institutions (FIs) in Tanzania. Specifically the study examined the extent to which lending criteria, SMEs owner-manager’s characteristic and loan characteristics have led to new SMEs failing to access credit from FIs. One hundred and five new SMEs-owner Managers responded to the questionnaires given to them. The study used only primary data which were obtained through questionnaires. SPSS soft ware program was used to perform three types of analysis in this study; which are correlation, regression and ANOVA .The study found that SMEs factors constrain new SMEs from accessing FI’s credit based on lending criteria, loan characteristics and SMEs’ owner- Manager. Lending criteria identified to constrain new SMEs from accessing FI’s credit were submission project plan, nature of the business conducted by new SMEs and younger age of the business. However poor preparation of business accountability by those new SMEs was identified to be root cause of all challenges due to lending criteria. Loan characteristics identified by correlation analysis to constrain new SMEs from accessing FI’S credit were short repayment period and high interest rate charged by FIs. Regression analysis revealed lending procedures to be significant predictor of all constraints arise due to loan characteristics. Additionally the study found there was no relationship between entrepreneurs’ gender and accessibility of FI’s credit but entrepreneurs with high level of education were mostly like to access FI’s loan.