Assessing the Accessibility of Local Government Loans for Startup Businesses: Evidence from Northern and Central Tanzania

Yona William Kitua; Ninza Mbaza

doi:10.37284/eajbe.8.3.4019

Yona William Kitua Tengeru Institute of Community Development
Ninza Mbaza Tengeru Institute of Community Development

DOI: https://doi.org/10.37284/eajbe.8.3.4019

Keywords: Local Government Loans, Startup Businesses, Financial Sustainability, Entrepreneurship, Tanzania

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Abstract

This study assesses the accessibility of local government loans in supporting startup business growth in selected councils of Northern and Central Tanzania, specifically Dodoma City, Meru District, and Hai District. Although Tanzania’s Local Government Finance Act legally mandates Local Government Authorities (LGAs) to allocate 10% of their own-source revenues as interest-free loans to women, youth, and persons with disabilities, empirical evidence on the accessibility of Local Government Loans for startup businesses remains limited. Using a quantitative cross-sectional research design, data were collected from 256 startup entrepreneurs through structured questionnaires. Descriptive and inferential analyses were conducted using SPSS to examine loan accessibility, application outcomes and barriers. The findings reveal that 63 (28.0%) of startups accessed LGA loans, while 134 (67.7%) of the loan applications were fully approved. The principal barriers to loan acquisition identified by respondents included bureaucratic delays, insufficient collateral, and inadequate access to information regarding loan application procedures. Policy interventions focusing on capacity-building, strengthened monitoring, and expanded loan accessibility are recommended to improve the developmental outcomes of local government loans. Overall, the study contributes to the understanding of state-facilitated financial empowerment strategies in emerging economies and provides actionable insights for policymakers, LGAs, and development practitioners seeking to promote grassroots entrepreneurship.

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