Abstract:
Small enterprises drive economic growth, reduce poverty, and create job
opportunities in Tanzania. This study aimed to assess the influence of relationship
lending on credit access by small enterprises in Moshi Municipality, Tanzania. The
study's objectives were to examine the relationship lending practices by small
enterprises, determine the influence of the length of relationship on credit access
by small enterprises, and analyse the association between multiple lending
relationships and credit access by small enterprises. Data were collected from 290
small enterprises in Moshi Municipality using a cross-sectional research design
and a survey questionnaire. Descriptive statistics and logistic regression models
were used in data analysis. The study revealed that most small enterprise owners
accessed loans from banks once per year with an average repayment period of one
to six months. The study also found that the length of the relationship and
collateral had a significant and positive influence on small enterprises' credit
access (0.596, Wald χ2
(1) = 5.092, p=0.024; 0.357, Wald χ2
(1) = 6.851,
p=0.009). Borrowing from multiple lenders was also found to have significant
positive influence on small enterprises credit access (2.186, Wald χ2
(1) = 15.393,
p= 0.000, while services and size of the firm (-1.749, Wald χ2
(1) = 9.888,
p=0.002; -0.221, Wald χ2
(1) = 5.481, p=0.019 were found to have significant
negative influence on small enterprises credit access.
In conclusion, the length of relationship, collateral, and multiple lending
relationships significantly influence small enterprises' credit access. It is
recommended that small enterprise owners should stay in close contact with their
lenders. The government also needs to increase its spending on credit guarantee
programs to improve access to loans for start-up businesses, small enterprises, and
individuals without established credit histories.
