Abstract:
Small enterprises play a significant role in driving economic growth, reducing
poverty, and creating job opportunities in Tanzania. Developing on this background,
the study investigated the influence of relationship lending on credit access by small
enterprises in Moshi Municipality, Tanzania. The study pursued three specific
objectives; to examine the relationship lending practices by small enterprises; to
determine the influence of length of relationship lending on credit access by small
enterprises; and to analyse the association of multiple lending relationships and credit
access by small enterprises. Through a cross-sectional research design, data were
collected from 290 small enterprises in Moshi Municipality using a survey
questionnaire. Descriptive statistics and logistic regression model were used in data
analysis. The study revealed that most of small enterprises owners accessed loan from
bank once per year with an average repayment period of one to six months. The study
also found that the length of relationship and collateral had significance 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, length
of relationship, collateral and multiple lending relationship have significant influence
on credit access by small enterprises. It is recommended that small enterprises owners
should stay in close contact with their lenders. There is also a need for the
government to increase its spending on credit guarantee programs to increase access
to loans for start-up businesses, small enterprises and individuals without established
credit histories.
