Using Financial Statements to Analyze the Effects of Multiple Borrowings on SMEs Financial Performance in Tanzania

This study assessed the effects of multiple borrowing on entrepreneur’s business performance in Iringa Municipality using financial statements collected from 102 SMEs. To analyse the data on the influence of multiple borrowing on financial performance, ratio analysis and paired sample t-test were used. The ratio analysis was divided into four categories: liquidity, profitability, efficiency and leverage. The empirical results indicate variations on the level of influence. In case of liquidity ratios, empirical results indicate that multiple borrowings have significant positive influence on current and quick ratios. For profitability, the multiple borrowings have significant positive influence on all three out of four (i.e. gross profit ratio, net profit ratio, and return on equity). Likewise, the empirical results show that multiple borrowings have significant positive influence on all indicators of efficiency and leverage ratios. The findings suggest that despite the challenges of multiple borrowings, the approach can used to improve financial performance of SMEs. However, for that to be achieved then it is necessary to control the risks of multiple borrowings through  information sharing among MFIs, introduction of flexible financial services, financial education for microfinance clients, and introduction of friendly financial statement framework for SME.