Effects of Microcredit on Micro, Small and Medium Enterprises Performance in Tanzania with Reference to Selected MSMEs in Iringa Municipality
The purpose of the study was to assess the effects of microcredit on Micro, Small and Medium Enterprises (MSMEs) performance in Tanzania, with reference to selected MSMEs in Iringa Municipality specifically, to examine the contribution of the loan amount on the performance of MSMEs, to examine the influence of interest rate on the performance of MSMEs and to determine the effect of initial capital on the performance of MSMEs. The targeted population was 874 MSMEs benefiting from microcredit services from Iringa Municipality, where a sample size of 274 MSMEs was drawn. A descriptive research design was employed, and a quantitative approach was applied to analyse data. Stratified sampling technique, simple random technique and Convenience sampling technique were used to select loan benefiting. The findings revealed that loans benefiting MSMEs at Iringa Municipality receive loans from financing institutions and use them to improve performance. Moreover, the study found that interest rate has no statistically significant on the performance of MSMEs in Iringa Municipality. In addition, findings revealed that there was statistical significance in the effects of initial capital on the performance of MSMEs. In the case of the normal regression output, the adjusted R2 equals 0.698, implying that the model explains about 69.8% variations in MSMEs performance. The study recommends that the Government should ensure that MSMEs receive appropriate loan amounts and should take proactive measures to regulate interest rates on microcredit loans. MSMEs should have a clear strategy for how these funds will be used. Financing institutions should recognise that loan provisions to MSMEs should be based on the specific needs of the business. Also, they should provide micro-loans at competitive rates that balance affordability for MSMEs and sustainability for the institution. For further studies, the researchers should conduct similar research in different regions or countries that will allow scholars to ascertain the general ability of the findings. Also, the researchers should conduct longitudinal studies that can provide invaluable insights into the long-term effects of microcredit on MSMEs’ performance
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