Abstract:
This study assessed the role of microcredit to Small Businesses (SBS) growth using Akiba
Commercial Bank (ACB), Moshi branch as a case study. The study was guided by the
following research questions; what are the conditions and criteria used in evaluating SBS
creditworthiness? What are the contributions of ACBs microcredit to SBS growth? How do
the small businesses use microcredit funds? What are the challenges faced by SBS and ACB
in managing microcredit? The study has revealed that microcredit is an essential ingredient
for promoting SBS growth. It shows that the ACB's microcredit has played a great role to
SBS growth in capital growth, sales and purchases improvement, changes in types of
businesses, increase in number of businesses, increment in varieties of products and growth
in profit. The study findings also show that majority of the SBS face different challenges in
managing microcredit such as lack of financial and business management skills, price
fluctuations, small amount approved by bank, shift competition, stealing of commodities,
price fluctuation due to high cost of living and high loan interest rate charged by the bank.
ACB also faces challenges in managing microcredit client like multiple loans, cheating on
collaterals and businesses information, poor/weak securities or collaterals, poor business
records, low level of clients' knowledge and understanding of banking matters, high rate of
defaulting, poor cash flows and lack permanent residence which lead to some of the clients
to vacate and disappear without taking full payments of the loans. This study concluded
that despite the challenges, microcredit has a great contribution to SBS growth and
recommends for policy changes and improvement.
