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

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.