Factors Affecting Small & Medium Enterprises (SMEs) Startup and Growth in Tanzania

Authors

  • Wineaster Anderson Anderson

Abstract

This study analyzes factors that are affecting the start-up and growth of SMEs in Tanzania. The interviews involved the institutions providing business support services to SMEs and a total of 150 randomly selected SMEs from the country’s commercial city of Dar es Salaam. The study examined seven factors, which were categorized into three broad groups: business environment (political, legal and regulatory environment & socio-economic environment); institutional support (resources and finance; management and know-how & appropriate infrastructure & technology) and individual attributes and knowledge (entrepreneurial tendencies & innovation, vision and exposure to external knowledge). The context description for qualitative data and the multiple linear regressions show that factors range from inborn individual attributes to complex relationships between often changing business environments. The competitive activities and location, inadequate finance, human and social resources, and technical and management skills play a crucial role in the start-up. Also the regulatory framework leads to excessively complex registration and licensing requirements. Inadequate technology and physical infrastructure have resulted in a shortage of premises and even the few premises available are well beyond the financial ability of most SMEs. Unreliable electricity negatively affects their growth. The study provides managerial and policy implications.

Author Biography

Wineaster Anderson Anderson

University of Dar es Salaam  Dar es Salaam, Tanzania

References

Ageba, G. and Amha, W. (2006). “Micro and Small Enterprises (SMEs) Finance in Ethiopia: Empirical Evidenceâ€, Eastern Africa Social Science Research Review, 22(1), 63-86. Amit, R., MacCrimmon, K. R., Zietsma, C., and Oesch, J. M. (2001). “Does money matter?: Wealth attainment as the motive for initiating growth-oriented technology venturesâ€, Journal of Business Venturing, 16(2), 119-143.

Anderson, W. and Mzee, M. (2013). Influences on Micro and Small Enterprise Start-up and Growth: Theory and Practice in a Developing Country Context, Lambert Academic Publishing, Germany.

Anderson, W. (2011). “Internationalization Opportunities and Challenges for SMES from Developing Countriesâ€, Journal of African Business, 12(2), 198-217.

Anderson, W. (2012). "A gender-based comparison of marketing strategies of SMEs in Tanzania." Why Marketing Standards? International Journal of Marketing Principles and Practices, 2, 32-42.

Anderson, W. and Saidi, S. A (2011). “Internationalization and Poverty Alleviation: Practical Evidence from Amani Butterfly Project in Tanzaniaâ€, Journal of Poverty Alleviation and International Development, 2(2), 17-45.

Benzing, C., Chu, H. M., and Kara, O. (2009). “Entrepreneurs in Turkey: A Factor Analysis of Motivations, Success Factors, and Problemsâ€, Journal of Small Business Management, 47(1), 58-91.

Davidson, P. (1991). “Continued Entrepreneurship: Ability, need and opportunity as determinants of small firm growthâ€. Journal of Business Venturing, 6, 405-429.

De Clercq, D. and Arenius, P. (2006). “The Role of Knowledge in Business Start-up Activityâ€, International Small Business Journal, 24(4), 339–358.

Djankov, S., Miguel, D. Qian, Y., Roland, G. and Zhuravskaya, E. (2004). Entrepreneurship: First Results from Russia. Last accessed on July 30th, 2013

Fumo, N. and Jabbour, C (2011. "Barriers Faced by SMEs: Evidence from Mozambique".

Industrial Management & Data Systems, 111(6), 849-868.

http://www1.worldbank.org/finance/assets/images/entrepreneurshiprussia.pdf

Jagero, N. and Kushoka, I. (2011). “Challenges facing women micro entrepreneurs in Dar es Salaam, Tanzania†International Journal of Human Resource Studies, 2, 1-9.

The International Finance Corporation (2005).

Kaijage, E.S. and Mwaipopo, L.J. (2004). Entrepreneurship Research and Development in Africa: Achievements, Challenges and Future Prospects. Mkuki na Nyota Publishers Limited, Dar es Salaam.

Kashangaki, J. (2005). Tanzania MSME Access to Finance Assessment: Funded by the IFC Netherlands Technical Assistance Trust Fund, International Finance Corporation, World Bank Group, Washington, DC

Kothari, C.R. (2007). Research methodology: methods and techniques, 2nd Ed, Delhi, New Age international publishers.

Kweka, J. and Fox, L. (2011). "The household enterprise sector in Tanzania: why it matters and who cares." World Bank Policy Research Working Paper Series, November

MacGregor, R., and Vrazalic, L. (2008). “The role of gender in the perception of barriers to Ecommerce adoption in SMEs: An Australian studyâ€, Proceedings of the International Business Information Management Conference, Kuala Lumpur, June 30–July 2, 2008.

Mead, D. and Liedholm, C. (1998). “The Dynamics of Micro and Small Enterprises in Developing Countriesâ€, World Development, 26(1), 6 I-74.

Mukhtar, S. M. (1998). Business characteristics of male and female small and medium enterprises in the UK: Implications for gender-based entrepreneurialism and business competence development. British Journal of Management, 9, 41–51.

Nafukho, F. and Muyia, M. (2010). “Entrepreneurship and socio-economic development in Africa: A reality or mythâ€, Journal of European Industrial Training, 34(2), 96-109.

Nichter, S. and Goldmark, L. (2005). Understanding micro and small enterprise growth. Micro Report, No.36, USAID

Nkya, E.J., (2003). “Institutional barriers to small-scale business development: a need for flexibility in Tanzanian tax and regulatory systemsâ€. Journal of Entrepreneurship, 12(1), 43-73.

Obamuyi, T. M. (2010). Firms' Performance and Lending Constraints in Nigeria; The Journal of Entrepreneurship (JoE). Sage Publisher, India

Olomi. D. R. (2009): African Entrepreneurship and Small Business Development, Small Firm Growth, UDSM, Dar es Salaam.

Papadaki, E. and Chami, B. (2002). Growth Determinants of Micro Businesses in Canada. Ontario. Canada

Parker, R., R. Riopelle and W. Steel. (1995). “Small Enterprise Adjusting to Liberalization in Five African Countriesâ€, World Bank Discussion Paper No. 271, African Technical Department Series. Washington, DC: The World Bank.

Porter, M. E. (2008). On Competition: Updated and Expanded Edition. A Harvard Business Review Book. United States of America

Schoar, A., (2010). The divide between subsistence and transformational entrepreneurship. In Innovation Policy and the Economy, 10, 57-81. University of Chicago Press.

Shane, S., Locke, E.A., and Collins, C.J. (2003). Entrepreneurial Motivation, Human Resource Management. Review, 13(2), 257–279.

Temtime, Z.T and Pansiri, J. (2004): Small Business Critical Success/Failure Factors in Developing Economies: Some Evidence from Botswana. American Journal of Applied Sciences 1(1), 18- 25.

United Republic of Tanzania (URT) Ministry of Industry and Trade. (2003). SME Development Policy 2003–2013. Dar es Salaam, Tanzania: Government printer.

URT National Bureau of Statistics and Office of Chief Government Statistician, 2013). The 2012 Population and Housing Census: Population Distribution by Administrative Areas

Wawire, N.H. and Nafukho, F.M., 2010. “Factors affecting the management of women groups' micro and small enterprises in Kakamega District, Kenyaâ€. Journal of European industrial training, Vol. 34, No. 2, pp.128-152.

World Bank (2011). Country SME map-Tanzania, Washington DC: World Bank.

World Bank. (2008). Country classification. As of 31 January 2009, Annex 1. Washington, DC: World Bank.

World Economic Forum, Global Competitiveness Report 2011- 2012, http://www3.weforum.org/docs/WEF_GCR_2011-12.pdf, accessed 23 February 2012.

Zimmerer, T. and Scarborough, N. (2005). Essentials of Entrepreneurship and Small business Management. Fourth Edition. Pearson Education.

Published

2018-04-17