The impact of formalisation on small and medium sized entreprises (SME) development a case of Kinondoni District

This study investigated the impact of formalisation on Small Medium Enterprise (SME) development in Kinondoni District. The main objective of the study was to analyse the impact of Business formalisation on SME development. The specific objectives of the study were to find out the effects of formalisation on access to credits and other financial services, to explore the relationship between formalisation and SME size growth, and examine the relationship between formalisation and SME revenue increase. A sample of 100 respondents was used in this study selected using simple random sampling. Data were collected using the questionnaire, interviews, and documentary review. The Statistical Package for Social Sciences (SPSS) version 20 was employed in data analysis. The study found that financial assistance such as credit is made easier after registration of the business. On the other hand, the findings show that, regardless of the formalisation of the business, there are other factors which can hinder one SME owner from attaining access to credits from the financial institutions. These factors include lack of collateral. It was also found that the majority of the SME grew up in size as evidenced by the increase in the number of employees and opening of new branches. In addition, the study found that revenue increased following the formalisation of the business. Thus, the study recommends that, government together with the help of financial institution should reconsider revising the fees and charges of formalizing businesses, also Tanzania government should provide education to SME owners on the importance of formalization.