The Role of Credit for Small Business Success

Abstract

The objective of this article is to examine the role of credit in generating entrepreneurial activities. The paper is based on a recent research combining case studies with a sample survey of businesses that gained access to credit from a Tanzanian government financial source. A substantially increased output is observed following access to credit. The findings reveal that the enterprises whose owners received business training and extension advice performed better than those that did not. The study further shows that many of the problems faced by the entrepreneurs are not related to capital, but rather arise as a result of macroeconomic and institutional constraints. Examples of the reported business barriers are poor infrastructural support and stiff competition amongst the micro and small–scale producers.