Challenges of Using Credit Facilities to Support the Growth of Small and Medium Enterprises in Tanzania.

In Tanzania, most small and medium enterprises SMEs use credit from financial institution to support their operations. This study sought to understand the challenges of using credit facilities to support the growth of (SMEs) in Tanzania. Specifically, on effect of high interest rate, strict loan repayment terms and small loan amount offered by financial institutions. To achieve this objective, the study employed descriptive research design. Convenient sampling technique was used to select the sample size. Data was collected using structured questionnaire from SMEs in Dar es Salaam. A total of 200 questionnaires were administered to various SMEs but the researcher managed to obtain 121 completed questionnaires representing a response rate of 60.5%. The collected data was edited, coded and analyzed using Statistical Package for Social Science (SPSS) and Microsoft Excel computer package. Both descriptive and inferential statistics were used. The research findings revealed that there was a strong positive relationship (R = 0.685) between interest rates, loan amount, loan terms and growth of SMEs. Also from the study it was evident that at 95% confidence level, the variables produced statistically significant values and can be relied to explain their effects towards the growth of SMEs. The findings further revealed that strict loan repayment terms, high interest rates as well as small loan amounts are still major challenges in accessing credit facilities despite their contribution towards SMEs growth. Lastly, the study recommends the need for the government to regulate the financial market through the credit bureau to enable SMEs operators to access credit with a fair charge of interest, and financial institutions to review their loan requirements to improve access to credit by SMEs. Keywords: Loan size, Loan terms, Loan interest rate & Loan