Empirical Evidence On The Contribution Of Credit On The Growth Of Smes: A Case Approach Of Dodoma Municipality

ABSTRACT

There is contradicting views on the impact of credit on the growth of SMES. Some studies are for the intervention while others are quite against it. There are also studies which do not show any impact at all. This study was put in place to provide an empirical evidence of the impact of credit on growth of SMEs. The aim was to solidify findings for those who support the intervention. The study was set to meet three objectives, namely; identifying possible factors hindering the implementation of credit policies on loans and advances to SMEs, determining the influence of credit contributions on the growth of SMEs and investigating on the challenges in accessing and utilizing of credit.

The study employed a multiple embedded case study design where eight cases were drawn from different categories of businesses taken from Dodoma Municipality. Data and information were collected and organized into case stories and were then analyzed by using pattern matching, comparison and explanation building.

It was found out that, interest rates on loan, collateral securities, false information provided by SMEs about business and nature of business were the main factors that hindered the implementation of credit policies on loans and advances to SMEs. It was also uncovered that, indeed, credit received from MFIs helped firms to grow specifically, in improving profits, increasing number of employees, enabling sustainability of families and increasing assets, sales and working capital. Nonetheless, it was also found out that, a number of challenges were there which acted as a stumbling block for accessing the loans from MFIs and utilizing them efficiently and effectively. These include but not limited to the procedure of accessing credit, high interests on loan, inadequate time period for loan disbursement and lack of collateral securities for the side of loan accessibility. Furthermore, challenges facing utilization of credit were mainly; repayment time period, low level of entrepreneurial skills, use of loans for unintended purposes and poor record keeping.