Access to Debt Finance and Performance of Small and Medium Enterprises

Abstract

The study investigated the effects of access to debt finance on the performance of SMEs in Tanzania. Data for the study was collected from SMEs which were being served by Private Agricultural Sector Support (PASS) to get credit facilities from formal financial institutions. The study collected data from 115 respondents, out of 152 respondents who were provided questionnaires. The collected data were analyzed quantitatively through Standard Multiple Regression to test the hypothesis that “There is a positive effect of access to debt finance on the performance of SMEs”. The results indicate that access to debt finance influences the profitability of SMEs. Also, it was revealed further that the effects were greater for ROA compared to GPM and ROE. This implied that access to debt finance increases the profitability of SMEs relative to total assets. It is, therefore, concluded that access to debt finance is an important ingredient for SMEs’ growth and performance.