The main objective of the study is to assess the effectiveness of financial institutions in
financing SMEs within Kilombero district in Tanzania, taking cognizance of the role and
contributions of CRDB Bank Tanzania Limited. However, there are number of rigidities
of a macroeconomic, institutional and regulatory nature that may bias the entire banking
system against lending to SMEs. SMEs in Tanzania are entangled with myriad problems
mitigating their growth in Tanzania notably among them are, lack of access to credit,
lack of market for their products, poor technology, poor physical infrastructures, poor
legal and regulatory framework and commercial banks are most often unwilling to
increase loan funding without an increase in the security given thereby leading to
stagnation of growth and certain instances unable to expand to enjoy economies of scale
necessary to serve their potential of being an engine of national growth and are thus
collapsing.
The study selected CRBD bank Kilombero branch as a unit of inquiry where by the
sample were selected from SME owners and bank staff. Researcher applied simple
random sampling, and purposeful sampling method as sampling techniques to ensure
that accurate sample were obtained for the study.
The sources of materials for the study were both primary and secondary. Primary data
were collected by the use of interviews, questionnaires and observation which were
designed and administered to SME customers and employees of the CRDB Bank..
Secondary materials were extracted from relevant textbooks, newspapers,
reports/articles, journals, bulletins and documents presented by corporate financial
analysts and policy planners. The data from the field were analyzed using the following
techniques: editing, tabulation, coding and Statistical Package of social science.
In view of the findings, it was recommended that banks should create a separate
department for the SMEs; the establishment of a common fund by the government for
SMEs; there should be a national policy on SMEs by the government in respect of
funding among others and educate SMEs in the efficient and effective financial
management of their businesses in order to sustain the SMEs to grow into much bigger
industries in the near future.