Abstract
The analysis of different SMEs definitions worldwide reveal that it is very difficult to arrive at a common definition. In fact one study by Auciello (1975) in 75 countries found more than 75 definitions were used in the target countries. This demonstrates very well that there is no common accepted definition of SMEs. SMEs businesses range from very small micro-firms run by one or two persons and very slow growth or no growth to fast growing medium businesses earning millions of dollars and majority employing as many as 250 employees (Fjose et al., 2010). SMEs all over the world and in Tanzania in particular, can be easily established since their requirements in terms of capital; technology, management and even utilities are not as demanding as it is the case for large enterprises. They are regarded as backbone of economic growth in almost all developed and developing countries. In Tanzania, SMEs contribute over 30% of the GDP, and employs 3-4 million people, which is 20-30% of the total labour force (Kazungu, Ndiege and Matolo, 2013). Therefore this paper has identified several challenges facing SMEs such as financial access which is consistently reported as one of the major obstacles to SME’s growth and development where only 20 % of African SMEs have a line of credit from a financial institution. And suggests technical approaches to solving them in respect to the developing economy of Tanzania. Keywords : Small and Medium Enterprises (SMEs), Gross Domestic Product (GDP), Challenges. DOI: 10.7176/JESD/11-17-07 Publication date: September 30 th 2020
Highlights
Due to fierce competition in the domestic market, many of Chinese small and medium enterprises (SMEs) focus on the foreign market, with its unique product and price advantage, they gradually moving towards the international market, and have made a great contribution on activating China’s economy, improving competitiveness of our products in the international market, and promoting economic international exchange of technology; they has been an important force in China's foreign exports
Financing problem faced by SMEs financial system are not perfect and their financial management are confusing, lacking of dedicated professional accountants, their financial transparency of the information provided by the finance department reports is low and there is a serious beautification report fraud, which are difficult for banks and other financial institutions to give them a fair and reasonable corporate credit rating, so it is difficult to decide whether the bank approved the loan business
Governments everywhere have begun to ask themselves what they can do to encourage the growth of SMEs, enabling them to contribute to the national economy
Summary
The credit line of SMEs are generally not high, and they seldom have sense of credit, leading banks and other financial institutions invest are very cautious when investing for SMEs. 1.1 Statement of Problem More than 95% of businesses in Tanzania are small enterprises. Micro and small enterprises are critical for supporting livelihoods as well as overall prosperity and progress They create employment at relatively low levels of investment per job; utilize and add value to local resources; foster equitable income distribution; and are better positioned to meet local needs in small markets. The technologies used by them are easier to acquire, transfer and adopt even for people with little education and training They have the potential to compliment large enterprises through partnerships and subcontracting relationships. Micro and small enterprises serve as training ground for entrepreneurship managerial development (Olomi, 2006)
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