The Perceived Contribution of Microfinance Banks’ Lending Services Towards the Growth of Micro and Small Entrepreneurs in Tanzania

Abstract

The overall aim of this study was to assess the contribution of Microfinance Banks‘ lending services towards the growth of micro and small entrepreneurs in Tanzania. The research was conducted in the Dar es Salaam region. The study used a purposive and simple random sampling technique to select a sample of 132 respondents. As data collection tools, interviews and questionnaires were used. The descriptive statistics and Statistical Packages for Social Science (SPSS) were used to analyze the field data quantitatively. Furthermore, MAXQDA10 was used to analyze qualitative data during the content analyses. The study's findings show that lending services provided by microfinance banks contribute to the growth of micro and small entrepreneurs. It has an impact on the long term viability of businesses among small and micro entrepreneurs. It also increases business size, the number of services offered, and revenue. It also has an impact on the increase in the number of employees as well as the transition of micro and small businesses into the formal sector. The landing models of microfinance institutions, on the other hand, make a medium contribution to the micro and small entrepreneur. Individual lending, group lending, community banking, and Village Savings and Loan Associations are examples of these models (VSLAs). Other lending models include the community, which is based on loans made to specific community projects; coorporative models; and association lending models, such as registered women's and youth associations. Nonetheless, the findings show that the level of satisfaction among micro and small business owners is low. Low level of satisfaction is determined by the loan offered, interest rate, training provided, loan requirements, lending service model, and the relationship between borrowers and lenders. The study recommends several solutions to remove the barriers that micro and small entrepreneurs face when seeking lending from microfinance banks. The recommendations include loan and entrepreneurial education; appropriate lending models based on the nature of micro and small entrepreneurs' businesses; and improving the relationship between entrepreneurs and lenders. In fulfilling this study different theries were used such as Agency theory, Relationship lending theory and Dynamic Theory of lending.