Trade credit as a finance strategy for small business enterprises (SBEs) in Mwanza

Sources of finance have been a problem to the Small Business Enterprises in Tanzania. This study aimed at assessing the usefulness of trade credit as a financing strategy for the small business enterprises in Mwanza, Tanzania. Data were collected from 114 respondents distributed to the small businesses in the city. The chi squire test was used to analyze the data. The findings provide evidence on the existence of the significant relationship between the strength of the social relationship (Networking) between the Small Business Enterprises with their suppliers and the utilization of the trade credit as a financing option. Whether the business was a manufacturing, trading or service (form of business) were found to explain the usage of trade credit. However, the study reveals that there is no statistical relationship between the gender of the operators of the business and the utilization of trade credit. The findings also did not justify the existence of relationship between the credit period, a term in the trade credit and the utilization of the trade credit financing. It is recommended that social relations between Small Business Enterprises with their respective suppliers of their inputs should be enhanced for the trade credit practicing to advance. The small business operators are advised to be attentive on the type of the businesses when choosing trade credit as a source of finance. Optimal utilization of the trade credit financing ultimately reduces reliance to other hardly accessible sources of finance such as bank loans.