Financing Preference for MSMEs in Rural Tanzania

The purpose of this study is to determine factors and identify the preferred type of financing among small business in rural areas in Tanzania. Written survey was used for data collection and the sample size was 102. Quantitative method was used to test the financing preference. It was found that business expansion (54%) and family obligations (32%) were the determining factors for external financing in the developmental stage.  In the start-up stage of the business, the study finds that business owners preferred internal financing (61.7%) from their own savings for financing business. In the developmental stage, they preferred external borrowing from Savings and Credits Cooperatives Societies (SACCOS) (W = 161.8), banks and other MFIs (W=57.2). The small business owners’ views SACCOS as most preferred type of financing due to its accessibility and impact on their businesses. The study concludes that internal and external funding is the backbone of rural MSMEs’ financing in Tanzania. We recommend authorities to strengthen rural SACCOS to bring significant impact on rural business development.