A Critical Analysis of Effects of Loan Conditions on Accessibility to Loans by Small Businesses in Tanzania

Abstract

Abstract: The study investigated the effect of loan condition on loans accessibility to small business in Tanzania. It explored the effect of loan covenants on small business on accessing loans and examined the effect of bank loan extension procedure on small business in accessing loans. Both theoretical and empirical literature was reviewed to inform the study. Quantitative and qualitative research approaches were employed to facilitate the study using a cross sectional study design. Data were collected from 89 respondents who included bank loans customers and loans officers. These respondents were sampled through the use of the purposive and stratified random techniques. Data were obtained through questionnaire, interview and documentary review. The data were then analyzed quantitatively and qualitatively. The findings revealed that bank created covenants affected small business in accessing loans from financial institutions. It was also revealed that customers differed in their conceptualization of the difficult and easiness of the bank provisions. Furthermore, it was evident that bank do formulate strict loans extension procedures so that to make sure that lessen loans defaults and increase the probability that loans are used as applied in the forms. It has been recommended that, improving business conditions boosting the capacity of SMEs, expanding financial sector and strengthening links between firms will permanently increase small business access to finance. It was also recommended that the government to play its role in creating conducive environment for the SMEs to flourish in Tanzania. Lastly based on study findings recommendations for further studies are proposed.