oa Business Management Review - The impact of financial institutions reforms on small and micro enterprises financing in Tanzania

Volume 5, Issue 2
  • ISSN : 0856-2253



This paper reports on the findings of an empirical study of the impact of the financial sector reforms on the financing of small and micro enterprises (SMEs) in Tanzania. The research question was whether there has been any improvement on the financing of the SMEs since 1991, when the financial sector was liberalised. Three approaches have been adopted in the financing of SME in Tanzania. These are the pro-state, pro-market and the social-market approaches. Despite the implemented reforms, it has been found that there has not been any improvement in the access to credit issued to SMEs by the formal financial institutions. The adopted changes in the approaches to credit delivery to the SMEs have not successfully addressed the start-up and expansion capital constraints of the SMEs. It is concluded that further innovations in the financial sector are needed so as to increase access of SMEs to credit as well as to savings services. The innovations may either be in the form of institutional linkages between formal financial institutions and other financing agencies, adoption of collateral substitutes or the establishment of financial transactions between large and small businesses.

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