The Impact of Working Capital Management on Expansion of International Trade in Tanzania

Abstract

This study examines the significance of working capital management practices in fostering international trade expansion in Tanzania, an area where limited research currently exists. Addressing this gap, the study explores the relationships between credit sales management, credit purchase management, and the cash conversion cycle in the context of Tanzanian businesses engaged in international trade. The research objectives were threefold: to assess how credit sales and credit purchases influence working capital, to evaluate the effect of the cash conversion cycle, and to understand how these factors collectively impact trade expansion. Using a quantitative methodology, data were collected through structured questionnaires distributed to stakeholders in Tanzanian international trade. Correlation analysis indicated strong interdependence among credit sales, credit purchases, and the cash conversion cycle, yet regression analysis revealed these variables accounted for only a minimal (4.1%) variance in total product sales per year, suggesting limited explanatory power. Additionally, heteroscedasticity testing confirmed model robustness, supporting the reliability of the findings. Conclusively, while efficient working capital management is crucial for business operations, its direct impact on international trade expansion remains limited within the study’s scope. The study recommends that future research incorporates additional variables, such as cultural or technological factors, to provide a more comprehensive understanding. For practitioners and policymakers, findings underscore the importance of optimizing credit and cash management strategies, improving trade facilitation, and supporting SMEs. By implementing these recommendations, businesses and government agencies can enhance financial resilience and foster sustainable international trade growth in emerging markets like Tanzania.