The Conundrum of Business Development Services (BDS) on access to finance for SMEs

Abstract

The study examined the influence of Business Development Services on access to finance for Small and Medium Enterprises in Tanzania. The study was conducted on private agricultural sector support (PASS) for small and medium enterprises (SMEs) to access debt finance from formal financial institutions. Out of the 1000 SMEs listed from PASS, a sample of 278 SMEs were selected using the sample determination formula. Two hundred seventy-eight (278) questionnaires were distributed to SMEs, and only two hundred sixty-two (262) were returned and filled out. Data was coded in SPSS and analyzed using Standard multiple linear regression. The results indicated that BDS explained 8.0 per cent of change in access to finance. The beta coefficients of all independent variables were positive, which implied that a unit increase in training leads to an increase in access to finance by 0.102, and one unit increase in financial linkage leads to a 0.039 increase in access to debt finance and a one unit increase in guarantee lead to 0.167 increase in access to finance. The study concludes that guarantee contributes more to access to debt finance than financial linkages and training. The study recommends that BDS be provided conveniently and affordable to enable SMEs to access debt finance easily from formal financial institutions.