CERTIFICATION

The undersigned certifies that he has read and hereby recommends for acceptance by
Tumaini University, Iringa University College, a dissertation entitled Barriers to
Access Finance of Micro and Small Tourism Enterprises in Zanzibar in partial
fulfilment of the requirements for award for the Degree of Bachelor of Arts in
Cultural Anthropology and Tourism.

Dr. H. Mpogole

Date

(Supervisor)

DECLARATION

We, Kharimu M. Nambwanga and Maliki O. Mohamed, hereby declare that the
content of this research report is our own study and findings. It has not been
submitted to any University or Professional award in any institution of Higher
Learning.
Candidates signature:
(Kharimu M. Nambwanga)
Candidates signature: .
(Maliki O. Mohamed)
Date

ii

COPY RIGHT
All rights reserved. No part of this research papers may be reproduced, in retrieval
system or transmitted in any form by any means like electronic, mechanical,
photocopy recording or otherwise without prior permission from the owner or
Tumaini University- Iringa College

2013
All rights reserved

iii

ACKOWLEDGMENTS

First and foremost we thank the Almighty God for making us mentally healthily,
actively, wisely and cooperatively in all times of conducting our research. Without
God nothing would have happened.
The long, lonely and challenging journey has made us to feel thirsty for more
knowledge. This research would not have been complete without the help and
support of many people. We thank the organization of Fisherman Tour which gave
us moral and material support and commitment in developing the capacity that has
facilitated this work to be in the present shape. We are deeply indebted to our
supervisor Dr. H. Mpogole of Tumaini University Iringa College for his time,
professional guidance and technical inputs which have significant impact to the final
production of this research. It is difficult to list all the people, but the following
deserve special thanks: Assistant Lecturer, Department of Cultural Anthropology and
Tourism, Mr. Jan Kuever, Mr. Emanuel Damalo Coordinator of the field in Cultural
Anthropology and Tourism. Dr. Gundular Fischer, deserves special thanks for her
frequent advices. We extend our special thanks to our parents for their financial
support.
We are deeply indebted to the Ministry of Information, Culture, Tourism, and Sports
in Zanzibar, Zanzibar Tourism Commission (ZTC), we are grateful to our fellow
colleagues (BACAT 3) for their kind support, encouragement and for living
peacefully for three years. May Almighty God bless them forever.

iv

DEDICATION

With great admiration and respect, we dedicate this work to our beloved parents Mr.
and Mrs. Nambwanga and Mr. and Mrs. Mohamed by sending us to school as they
knew the importance of education. May the Almighty God bless them forever for
upbringing us in an excellent and an appropriate manner.

ABSTRACT

This study assessed the barriers of access to finance of micro and small tourism
enterprises. The research questions centred on the nature of ownership, access to
credit and training as well as barriers to access credit among MSE operators. The
study used both primary and secondary data. Primary data were collected from a
structured questionnaire administered to a random sample of 60 respondents at Stone
town in Zanzibar.
The study findings show that most of MSEs were managed by sole owners which is
not preferred by financial institution in provision of credit. Also study revealed that
many MSEs had acquired training compared to previous studies in basic skills
though many claimed that they lacked important skills such as marketing and
finance. It was revealed that access to finance by MSEs was still a major challenge
impeding the realization of the full potential of MSEs as engines of poverty
alleviation, employment creation and economic growth at large.

The study

concluded that the key factors affecting MSE access to finance include lack of
security and collateral, poor business plan, poor financial records and poor
entrepreneurial skills. Therefore it is recommended that policies aimed at solving
access to finance challenges should be developed and progress in that regard should
be constantly monitored and revised to eradicate the problem.

vi

TABLE OF CONTENTS
CERTIFICATION ......................................................................................................i
DECLARATION .......................................................................................................ii
COPY RIGHT...........................................................................................................iii
ACKOWLEDGMENTS ...........................................................................................iv
DEDICATION ........................................................................................................... v
ABSTRACT..............................................................................................................vi
TABLE OF CONTENTS.........................................................................................vii
LIST OF TABLES ....................................................................................................xi
LIST OF FIGURES ................................................................................................xiii
LIST OF ABBREVIATION AND ACRONYMS..................................................xiv
CHAPTER ONE ........................................................................................................ 1
1.0 INTRODUCTION ........................................................................................... 1
1.1 BACKGROUND OF THE STUDY ............................................................................ 1
1.2 STATEMENT OF THE PROBLEM ........................................................................... 3
1.3 OBJECTIVES OF THE STUDY ................................................................................ 3
1.3.0 MAIN OBJECTIVE ............................................................................................ 3
1.3.1 SPECIFIC OBJECTIVES ...................................................................................... 4
1.4 RESEARCH QUESTIONS ....................................................................................... 4
1.5 SIGNIFICANCE OF THE STUDY ............................................................................. 4
1.6 DELIMITATION OF THE RESEARCH ...................................................................... 5
1.7 CONCEPTUAL FRAMEWORK ............................................................................... 5
1.8 DEFINITION OF KEY TERMS ................................................................................ 7
CHAPTER TWO ....................................................................................................... 9
2.0 LITERATURE REVIEW ................................................................................. 9
2.1 NATURE OF OWNERSHIP OF MSES IN TOURISM SECTOR ..................................... 9
2.2 CATEGORIES OF MSES IN TERM OF EMPLOYEE AND CAPITAL ............................ 9
vii

2.3 SOURCE OF FINANCE FOR MSES ...................................................................... 12

2.4 BARRIERS TO ACCESS FINANCE OF MICRO AND SMALL TOURISM ENTERPRISES 12
2.4.1 POOR FINANCIAL RECORDS OF MSES ........................................................... 12
2.4.2 DEMONSTRATION OF REPAYMENT CAPACITY ................................................ 13
2.4.3 INABILITY OF MSES TO FULFILL COLLATERAL REQUIREMENTS .................... 13
2.4.4 FAILURE TO PREPARE AND PRESENT BUSINESS PLAN ..................................... 13
2.4.5 MSES ARE PERCEIVED AS HIGH RISKY .......................................................... 14
2.4.6 LACK OF TRAINING AND HUMAN RESOURCES SKILLS .................................... 14
2.4.7 MARKETING SKILLS ...................................................................................... 14
2.4.8 LACK OF ENTREPRENEURIAL SKILLS AND EDUCATION .................................. 15
2.4.9 MISMANAGEMENT OF RESOURCES ................................................................ 16
2.4.10 INADEQUATE INSTITUTIONAL SUPPORT ....................................................... 16
2.4.11 BANKS RELUCTANCE TO LEND ................................................................... 16
2.5. RESEARCH GAP .............................................................................................. 17
CHAPTER THREE.................................................................................................. 18
3.0 RESEARCH METHODOLOGY ................................................................... 18
3.1 RESEARCH DESIGN ........................................................................................... 18
3.2 AREA OF THE STUDY ........................................................................................ 18
3.3 POPULATION OF THE STUDY ............................................................................. 19
3.4 SAMPLING TECHNIQUE ..................................................................................... 19
3.5 SAMPLE SIZE .................................................................................................... 19
3.6 TYPES AND SOURCES OF DATA ......................................................................... 20
3.6.1 PRIMARY DATA ............................................................................................. 20
3.6.2 SECONDARY DATA ........................................................................................ 20
3.7 DATA COLLECTION METHODS .......................................................................... 20
3.7.1 INTERVIEW ................................................................................................... 21
3.7.2 QUESTIONNAIRE ........................................................................................... 21
3.8 DATA PROCESSING AND ANALYSIS PLAN.......................................................... 21

viii

CHAPTER FOUR.................................................................................................... 22
4.0 RESULTS AND ANALYSIS OF THE STUDY ............................................ 22
4.1 THE NATURE OF THE MSES OWNERSHIP IN THE TOURISM SECTOR. ................ 22
4.1.1 GENDER OF THE RESPONDENTS ..................................................................... 22
4.1.2 AGE OF RESPONDENTS .................................................................................. 23
4.1.3 LEVEL OF EDUCATION................................................................................... 23
4.1.4 POSITION IN THE BUSINESS............................................................................ 25
4.1.5 NUMBER OF EMPLOYEE IN THE BUSINESS ...................................................... 25
4.1.6 LEVEL OF BUSINESS EXPERIENCE AMONG OPERATORS OF MSES .................. 26
4.2 ACCESS TO CREDIT AND TRAINING IN TOURISM MSES ................................... 27
4.2.1 SERVICE OFFERED BY THE BUSINESS ............................................................. 27
4.2.2 SUPPORT DURING START UP .......................................................................... 28
4.2.3 CURRENT INSTITUTIONAL SUPPORT .............................................................. 29
4.2.4 AWARENESS ABOUT SUPPORT INSTITUTIONS ................................................ 30
4.2.7 TRAINING DURING BUSINESS START UP ......................................................... 30
4.3 BARRIERS TO CREDIT ACCESS IN ZANZIBAR MSES ......................................... 31
4.3.1 LENGTH OF REGISTRATION PERIOD ............................................................... 31
4.3.2 MARKETING MEDIUM.................................................................................... 32
4.3.3 SKILLS RECEIVED.......................................................................................... 33
4.3.4 FUND FOR START-UP BUSINESS .................................................................... 34
4.3.5 HOW EASY IT IS TO GET FUNDS...................................................................... 34
4.3.6 PROBLEMS IN GETTING FINANCE ................................................................... 35
4.3.7 MANAGEMENT OF FINANCE .......................................................................... 36
4.3.8 SKILLS THAT WERE LACKING DURING START-UP ........................................... 37
4.3.9 THE MOST IMPORTANT BUSINESS SKILLS ...................................................... 38
4.4 SUMMARY OF THE FINDINGS ............................................................................ 39
CHAPTER FIVE...................................................................................................... 40
5.0 CONCLUSION AND RECOMMENDATIONS............................................ 40
5.1 CONCLUSIONS.................................................................................................. 40
5.2 RECOMMENDATIONS ....................................................................................... 41
ix

REFERENCES ..................................................................................................... 42
APPENDIX ONE ................................................................................................. 44
QUESTIONNAIRE.............................................................................................. 44

LIST OF TABLES

Table 1. Categories of MSEs in term of employee and capital.................................. 11

Table 2. Sample size in tourism industry ................................................................... 19
Table 3. Gender orientation of respondents ............................................................... 22
Table 4. The age of the respondents........................................................................... 23
Table 5. Level of education........................................................................................ 24
Table 6. Position in the business ................................................................................ 25
Table 7. Number of employee in the business ........................................................... 26
Table 8. Level of business experience among operators of MSEs ............................ 26
Table 9. Service offered by the business.................................................................... 27
Table 10. Support during start up............................................................................... 28
Table 11. Business areas where support was given ................................................... 28
Table 12. Current institutional support ...................................................................... 29
Table 13. Awareness about support institutions ........................................................ 30
Table 16. Training during business start up ............................................................... 31
Table 14. Length of registration period ..................................................................... 32
Table 15. Marketing medium..................................................................................... 32
Table 17. Skills received ............................................................................................ 33
Table 18. Fund for start-up business .......................................................................... 34
Table 19. Easy to get funds ........................................................................................ 35
xi

Table 20. Problems in getting finance ....................................................................... 35

Table 21. Management of finance.............................................................................. 36
Table 22. Skills lacking during start-up ..................................................................... 37
Table 23. The most important business skills ............................................................ 38

xii

LIST OF FIGURES

Figure 1: Conceptual framework model ...................................................................... 6

xiii

LIST OF ABBREVIATION AND ACRONYMS

ILO

International Labour Organization

ME

Micro Enterprises

MKUZA

Mkakati Wa Kukuza Uchumi Na Kupunguza Umasikini

Zanzibar

MSE

Micro and Small Enterprises

NGO

Non Governmental Organizations

SE

Small Enterprises

SIDO

Small Industries Development Organization

SMEs

Small and Medium Enterprises

WTO

World Tourism Organization

xiv

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the study

Tourism has become the biggest economic activity of this day and age. With 476
billion dollars in 2000, tourism is doubtless the primary source of international trade
receipts according to World Tourism Organization (WTO).WTOs vision 2020
presents an optimistic picture for the tourism sector in Africa with the growth of 5.5
per cent a year forecast of the period 1995 2020, as against the global rate of 4.1
percent of the 77 million international tourist arrivals anticipated in the continent in
2020. An estimated 17 million will be in East African countries producing an
average growth of 5.3 percent (Allen and Brennan, 2004:38). The contribution of
the tourism industry to the Gross Domestic Production (GDP) of many countries in
the world has increased tremendously over the recent past (ibid). Cooper and
Sheperd (1996:278) estimate that in 1995, tourism contributed 10 percent to the
GDP of the world economy, 10.5 percent to the GDP of the United States of
Americas economy, and 12 percent to the British economy.

Zanzibar tourism, began in the late 1980s and is still a new industry, struggling to
improve standards, with 87,511 tourists an increase of 43 percent, US$ 4,471,000
foreign earnings in 2002. The strong development of tourism in Zanzibar is
associated with several factors including social and political stability in Zanzibar,
political stability in East Africa region, steady national economic growth with
1

improvement of income distribution, security for the tourists is assured, steady

economic growth in outbound countries (Zanzibar Tourism Policy, 2002).

The growth and development of the small and micro business sector is
acknowledged by most interest groups and policy makers as being of critical
importance to the ability to address serious problems of unemployment and income
inequalities among the different racial groups as well as the uneven participation in
the economic life of the country (Mallane, 2004:24).
Generally, Zanzibar is dominated by 72 percent of the micro-enterprises with
between 1 and 2 employees. That overtime employment opportunities in terms of
the total number of workers employed by the business firms had increased. Both the
business register and business census indicate that majority of businesses of Micro
and Small Enterprises (MSEs) are owned by families. This is mainly intended to
ensure security of assets as well as a means of minimizing operating costs. The
findings show that Unguja is home for most enterprises 70% compared to Pemba
30% (Zanzibar Human Development Report, 2009).
The Zanzibar Small and Medium Enterprises (SME) policy of 2006 aimed at
developing and creating a conducive environment through participation of public
and private sectors for the purpose of increasing employment provision, income
generation and poverty reduction. The policy and poverty reduction programmes,
Mkakati wa Kukuza Uchumi Na Kupunguza Umasikini Zanzibar (MKUZA) aim at
increasing job opportunities through SMEs. SMEs are important to the national
economic (Zanzibar Small and Medium Enterprises policy, 2006).
2

1.2 Statement of the problem

Micro and Small Enterprises (MSEs) need some assistance in terms of training,
technical support and loans from various sources such as NGOs and Government.
Many stakeholders have been engaged in operations of different projects relating to
economic and micro financing activities such as lending to MSEs. In spite of these
activities to MSEs, there is still poor performance of MSEs in terms of tourism
industry as the microfinance institutions which deliver credit to micro and small
enterprises do not seem to close finance gap in supply and demand for finance
(Sterren, 2008). Given their lack of access to credit, micro and small enterprises in
developing countries are unable to compete against large international suppliers of
accommodation and tourism services (Sterren, 2008). As a consequence, the
potential of positive local economic impacts from growth of MSEs through tourism
is not fully used in Zanzibar. Further research is required to develop appropriate
(tailor-made) financial instruments that fit the needs of these tourism micro- and
small enterprises. Therefore this study aims at assessing barriers to access finance
of micro and small tourism enterprises in Zanzibar.
1.3 Objectives of the study
1.3.0 Main objective
The main objective of this study was to assess the barriers to access finance of
micro and small tourism enterprises.

1.3.1 Specific objectives

i.

To assess the nature of the ownership of MSEs in tourism sector.

ii.

To assess tourism MSEs in term of access to credit and training.

iii.

To determine barriers that hinder to access credit among MSEs in Zanzibar.

1.4 Research questions

i.

What is the nature of the ownership of MSEs in tourism sector?

ii.

What are the sources used by tourism MSEs in accessing credit and
training?

iii.

What are the barriers that hinder MSEs in accessing credit in Zanzibar?

1.5 Significance of the study

i.

The findings of this study might act as a reflection which enables the
government to rectify its policies and regulations so as to create a good
environment of small and micro tourism entrepreneurs.

ii.

The findings of the study might also help or assist Non-government

organizations develop supportive strategies that might help MSEs
development.

iii.

The findings and recommendations of this study might provide a source of

literature survey to future researchers and scholars who need to pursue
similar research.

1.6 Delimitation of the research

In order for the research to be manageable it needs to be delimited according to the
type and size, the geographical location as well as the organizational level. In terms
of size and type of the organization,

the research focused on business

organizations that are owned by one or two people and employ 10 people or less.
The study was confined to the Stone town which encompasses of Kibokoni, Vuga,
Shangani, Baghani, Mkunazini, Darajani, Kokoni, Kiponda, and Malindi. The study
focused on small and micro businesses in the accommodation, transport, art and
craft sectors of the tourism industry.
1.7 Conceptual framework
This study has been organized under the assumption that the Government has
instrumental roles to play in development and growth of MSEs in tourism sector in
Zanzibar. However, there might be certain challenges that hinder the development
of the sector in the country.

GOVERNMENT SUPPORT

GOOD
ENVIRONMENTS
Training and
education

MICRO AND SMALL

ENTERPRISES

REGULATORY
FRAMEWORK

Banks
NGOs

Policy and
regulations
Fair Taxation
Capital
Markets

- SIDO
- MKUZA

BARRIERS TO ACCESS FINANCE OF MSEs

-Failure to prepare and present business plan

-Inability to fulfil collateral requirements
-MSEs are perceived as high risky
-Poor financial records

Figure 1: Conceptual framework model

1.8 Definition of key terms

i.
Tourism
Comprises the activities of persons traveling to and staying in places outside their
usual environment for not more than one consecutive year for leisure, business and
other purposes not related to the exercise of an activity remunerated from within the
place visited ( WTO, 1981).
ii.

Enterprise

For the purpose of our discussion the terms firm establishment business and
enterprise are used interchangeably. Enterprise is defined as any income earning
activity that is not in primary agriculture or mineral production.
iii.

Micro Enterprise

Are those enterprises with 10 or fewer workers (Gray, 1996). Micro enterprises are
mostly family firms with one single workers although other have some regular
workers; they use traditional technologies based on widely existing technical
knowledge, existing labor skills and existing raw material supplies and typical save
local market; MEs are usually located in the home of the owner (Haan, 2006 ).
iv.

Small Enterprise

Are those enterprises that have from 11 to 50 workers (Gray, 1996). According to
Burns and Dewhurst (1999:2) small businesses are small firms that have a relatively
small share of the market, that are managed by owners in a personalized way and
are independent so they do not form part of big businesses. Small enterprises
employ from roughly 10 to 50 workers and use non tradition or modern
7

technology in some aspect of transformation process; their products and services

range from simple to complex and similarly span a range of consumer type and as a
result their marketing pattern maybe somewhat complex, reflecting innovation in
raw material procurement and output sales; Some of SEs are formal, paying some
taxes, registered by municipality (Haan, 2006).
v.

Start-up

Burns and Dewhurst (1999:20) define a start-up as the process by which an

individual arrives at a decision to try to develop a business out of an idea and the
process of assembling the resources necessary to begin trading. According
Longenecker, Moore and Petty (1996:41) start-up is defined as the resources that
would be needed to create a small business from scratch. For the purpose of this
research, start-up refers to initial capital to start a small business.

CHAPTER TWO

2.0 LITERATURE REVIEW

It is the process of reading, analyzing, evaluating, and summarizing scholarly
materials about a specific topic

2.1 Nature of ownership of MSEs in tourism sector

Most of the tourism services at the level of a destination are delivered through
micro- and small enterprises. In the accommodation sector alone, it is estimated that
80% of bed capacity is held in small, usually family run establishments. Small
businesses provide the crucial linkages between different components of the tourism
value chain: local transportation, food and beverages, small-scale accommodation,
shops and retail services. (WTO, 2005)
2.2 Categories of MSEs in term of employee and capital

In tourism industry, micro and small enterprises have been categorized into three
main types according to International Labor Organization (ILO, 2003). Tourism
self-employed poor are commonly seen in tourism destinations includes street
vendors, massage, luggage-carriers, and shoeshine boys. Mostly these poor are
working on an irregular basis, mainly they are not producing but merely trading
services or products. Self- employed poor combine tourism income with
agricultural labour activities in the off-season.

Micro tourism enterprises are only operating with the tourism sector includes guide
services, small spa and massage-facilities, specialized bakery and pastry shops,
coffee shops, souvenir- trading and crafts shops, travel agencies, small tour
operators, small lodges small lodges rented. The main feature of these enterprises is
that their income depends on seasonal and irregular sales. Tourism micro
entrepreneurs need access to sufficient amounts of working capital for covering
seasonal fluctuations, but also to finance.

Small tourism enterprises are enterprises which deliver difference tourism products
and services. Examples are diving schools, language schools, production companies
of processed agricultural products like milk, cheese factories, lodges, small hotels,
larger restaurants, recreation businesses, bus companies, tour operators, etc. At this
level, enterprises might be specializing in some tourism services, products or
specifically target segments of tourists markets. When successful, small enterprises
will hire employees, register their business, and invest in fixed assets like land and
buildings.

10

Table 1. Categories of MSEs in term of employee and capital

Types/

No.

categories

employee

Self-employed
poor

Micro
enterprise

1-9

Small
enterprise

10-49

Characteristics

Asset base for

accumulation

Mostly part-time labour,

temporary, sometimes
seasonal activity, family
based labour.
Main aim additional
family income.

No permanent asset
base, no capital
accumulation,
permanent cash
shortage. Business
only as survival
strategy.
Not focused on economic Permanent
expansion.
availability of liquid
Fixed business premises, assets, some saving
limited fixed assets.
Little capital
Family labour, informal
accumulation.
or formal status.
Income stabilization
Little orientation to
as main purpose.
growth.
Tourism is one of
multiple family income
sources
Partially formalized,
Business as main
operating license
strategy, nonProfit/growth oriented
permanent
Specialized tourism
availability
business possible.
of fixed assets,
capital
accumulation,
income and
return oriented

Micro-enterprise is defined as any enterprise which has a turnover or total assets not
exceeding $30,000 and employs not more than 5 persons; Small-enterprise is
defined as any enterprise which has a turnover or total assets between $30,000 and
$100,000 and employs between 6 to 20 persons. National Centre for Small and
Micro-Enterprises Development (NCSMED, 2003)

11

2.3 Source of finance for MSEs

MSEs draw financing from a variety of sources. Around 75-90% of MSEs rely on
internal savings, retained earnings and borrowing from family, friends and money
lenders collectively known as informal sector as opposed to the 3-18% which has
access to formal sector finance including banks, capital markets, venture capitalists,
grants, government assistance, trade credit. (RAM Consultancy Services, 2005)
2.4 Barriers to access finance of micro and small tourism enterprises
2.4.1 Poor financial records of MSEs
Banks requirement of financial records on the past performance of the enterprise.
Many MSEs have difficulties in providing these. The official financial statements
include the cash flow, balance sheet and profit and loss statements. Usually, bankers
evaluate cash flow statements seriously.

The constraint put on MSEs access to

finance by the level of requirements of financial records varies between the

different financial institutions. Those who target mainly micro enterprises do
generally not require balance sheets or profit and loss statements. However, they are
nevertheless interested in the past performance of the applicants enterprise. To
build an idea on it, they often rely on simple sales records. For the lack of proper
accounts, many banks use bank statements as a proxy to analyse the financial track
record of a small enterprise. For the enterprise this means that its access to credit is
constrained by having an active and positive banking track record. (Heidelberg,
2008).

12

2.4.2 Demonstration of repayment capacity

MSEs have difficulties in convincing the banks on scepticisms of their repayment capacity.
The core of the repayment capacity is the cash flow of the enterprise after receiving the
loan. If the loan serves to finance one specific transaction only, it is fairly easy to establish
the cash flow. The only requirement in this case is that the applicant brings the contract of
the order for the transaction. The bank then cross-checks directly with the issuer of the
order. It becomes more complicated if an MSE applies for working capital or for a fixed
investment. The returns are more difficult to determine and the analysis of the bank
becomes more complex which consequently, MSEs have more to prove. (Heidelberg,
2008).

2.4.3 Inability of MSEs to fulfill collateral requirements

The barrier for MSEs in accessing credit is the security or collateral requirements of the
banks. MSEs often do not have assets that qualify as security for a loan, or if they have the
assets they do not have proper titles. Personal guarantors are another asset for security and
equipment and other moveable assets used as collateral. Many banks however, reject
moveable assets as securities, simply because they can literally be moved out of reach and
be inaccessible for the bank in case of default. (Heidelberg, 2008).

2.4.4 Failure to prepare and present business plan

The strictest form is a formally written business plan including cash flow
projections for the future. Not many MSEs are able to meet this requirement. And
many banks complain that MSEs submit business plans that look very sophisticated
on paper only, as they have been developed by consultants on behalf of the MSE.

13

But the MSE itself is unable to understand or implement the plan. (Musara and
Olawale, 2012).

2.4.5 MSEs are perceived as high risky

Banks find it risky and expensive to offer loans to MSEs and believe that the unit
cost of giving small loans to MSEs are greater than the unit costs of giving big loans
to big businesses. It is those big loans that attract good interests rates, which are
profitable to the banks. Thus, SMEs are confronted with the reluctance of banks to
lend in small amounts. Even when loans are available procedures for getting loans
are complex and sophisticated (Some, 2006).
2.4.6 Lack of training and human resources skills

Small and micro businesses also lack in critical skills that are needed by a modern
company to operate particularly in a competitive environment. Nieman et al. (2003)
mention that there is generally a shortage of management and leadership skills in
many small and micro businesses. Julien (1998) further indicates that in view of
their limited resources, small and micro businesses tend to ignore this area
completely or they do not give it any adequate attention. Longenecker et al. (1996)
define the purpose of training as preparing workers to perform duties for which they
have been hired for more efficiently.
2.4.7 Marketing skills
Marketing is about satisfying the needs of customers and is very important for
business. There is always a problem when there are no marketing skills in an
14

organization. Morrison, Rimmington and Willliams (1999). Julien (1998) points out
that the lack of marketing skills in small and micro businesses leads to a situation
where about seventy percent of the market does not know about the products and
services provided by the particular small and micro businesses, further states that
absence of marketing skills would also make the small and micro businesses not to
know the competitors in the market. Nieman et al. (2003) is of the view that, this
constraint is caused by the fact that marketing is not given a priority in their overall
business approach. Inadequate sales or client attraction might be offered as the
reason for the demise of a small business, however, that might have resulted from
conditions beyond the control of the small business. This is indicated by
Longenecker et al. (1996).
2.4.8 Lack of entrepreneurial skills and education

The presence of entrepreneurship skills in the owners of small and micro businesses
is one of the important determinants of the success of that particular enterprise.
Nieman, Hough and Nieuwenhuizen (2003) refer to these skills as critical success
factors that make or break the small and micro businesses. Nieman et al. (2003)
further mention creativity and the innovation of the entrepreneur, as cutting across
all entrepreneurship skills. Entrepreneurship skills also include the following skills,
which are going to be discussed in the following subsections. Skills and education
rank higher as major obstacles to enterprise operations and growth. (Zanzibar
Human Development Report towards Pro Poor Growth, 2009).

15

2.4.9 Mismanagement of resources

It is common practice in businesses for managers or owners to reward themselves
with huge amounts of money before realizing the prospects of the business. This
aspect is prevalent especially in young enterprises. It is the responsibility of
business owners and managers to avoid using assets of the business for personal use
at the expense of the business (Van Aardt, Van Aardt, Bezuidenhout and Mumba,
2008).
2.4.10 Inadequate institutional support
One of the challenges that confronted small and micro businesses is lack of impact
that institutions dealing with the development of small and micro businesses, had
been having on the sector. Murphy (1996) states that in most developing countries,
institutional support for small and micro businesses has been piecemeal and lacks
coherence.

Insufficient competition and inadequate information on the credit

markets of Tanzania, banks are discouraged and not willing to lend to SMEs. Small
and Medium Enterprise Development Policy of Tanzania (2002).
2.4.11 Banks reluctance to lend

For many years Africas formal banking system faced both high risk and high
transaction costs in lending to small enterprises. Such impediments largely
precluded their access to formal finance. For example, a survey which tracked bank
borrowing by manufacturing firms in six African countries during the 1990s found
that among those firms which wanted a loan, small firms had had substantially
worse chances of getting one (Bigsten et alii, 2003).
16

2.5. Research Gap

Different scholars have written about the barriers to access finance of micro and
small tourism enterprises in different parts of the world such as Europe, America,
Nigeria, Tanzania and other parts (Onugu, 2005; Asian, Manage, 2006; Kenneth, R.
& Kibera, 1996). But no one has written about the barriers to access finance of
micro and small tourism enterprises in Zanzibar. Therefore it is where the research
gap was seen. There was a need to research in Zanzibar so as to come up with the
information which could be useful for the comparison and contrast with the
information from other areas, so thats why the researcher team decided to conduct
research in Zanzibar.
Moreover, there have been a number of valuable studies of the barriers to access
finance of micro and small tourism enterprises (Scarborough and Zimmerer, 1996;
Gerding, 1999; Taylor, 1996), all of which present problems on accessing finance
on the sector. However, none of these studies provide a picture of the changes over
the period or forecasts the trends in accessing finance to MSEs.

17

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

This chapter will discuss the following; research area, research design and data
collection methods. Research methods, are set of rules and guideline which direct a
researcher to collect data about the phenomenon being studied. Kothari, (2002)
defines it as the systematically way of solving the problem. There are different
methods and techniques were used to collect data on our topic.
3.1 Research design
A research design is the conceptual structure within which a research is conducted
(Kothari, 1990). Mean while Churchill, Gilbert et al, (2002) give a simple definition
of research design as framework for a study, used as a guide in collecting and
analyzing data. The research design for this study was a quantitative. This approach
was preferred due to its ability to generate data in quantitative form that could be
subjected to thorough quantitative analysis in a formal and firmly style.
3.2 Area of the study
The study was confined to the stone town which encompasses of Kibokoni, Vuga,
Shangani, Baghani, Mkunazini, Darajani, Kokoni, Kiponda, and Malindi. This area
of study was selected because it has highest number of MSEs and therefore the task
of coming up with a good representation of the sample of MSEs was easy. Also
selection of survey increased the potential of the study to reveal the Barriers to
access finance of micro and small tourism enterprises in Zanzibar.
18

3.3 Population of the study

The study aimed to collect data from the following population, Small and micro
businesses in Zanzibar stone town especially in the accommodation, transport, art
and craft sectors of the tourism industry.
3.4 Sampling technique
Sampling is the process of obtaining the subjects of the study from the population
(Kothari, 2000). This study used non - probability sampling based on collecting
data according to accessibility or availability of individuals. Within non probability sampling, snow ball and convenience techniques were applied to collect
data by distributing the questionnaire to the respondents.
3.5 Sample size
Sample size refers to the number of subjects or individuals selected from the study
population (Kothari, 2000). The appropriate sample size for this study were 60
respondents after considering subsector criteria and their contribution in tourism
industry includes accommodation, transportation as well as art and crafts which
result to obtain a deeper view of the problems understudy.
Table 2. Sample size in tourism industry
Accommodation

30

Transportation

Arts& Craft

15

15

19

TOTAL

60

Therefore this sample size meets the required standards of data collection such as
relevancy, efficiency, reliability and the representativeness of Micro and small
enterprises in Tourism sectors.
3.6 Types and sources of data
3.6.1 Primary data
The primary data are those which are obtained from original sources of the area
through questionnaire and interviews. The primary data for the study were obtained
from MSEs found in Zanzibar.
3.6.2 Secondary data
These are the data which was collected from other existing works to support our
study. Normally there are second hand information which involves any existing
work from library (books, magazines, journals and newspaper), internet, research
works and other places. In this study secondary data was obtained from the Iringa
university college library, the Internet and other sources found during the field
research.
3.7 Data collection methods
The data was collected by using both secondary and primary data so as to analyse
barriers confronting micro and small enterprises in tourism in Zanzibar. The
following methods were involved in data collection:

20

3.7.1 Interview
This is the technique of collecting data through conversation; This is the
conversation between researcher and respondent which was guided by the
preparation of questions. The respondent included small entrepreneurs in
accommodation, transportation and arts and crafts in tourism industry. Also other
stakeholders like government and supportive institutions were involved.
3.7.2 Questionnaire
This is the method of collecting Data whereby a questionnaire is sent to respondent
connected with respect to answer and return the questionnaire to the researcher. The
questionnaires were distributed to the respondent obtained at study area in regard to
the objectives of the study. Leedy and Ormrod (2001:191) states that the common
instrument used for observing data beyond the physical reach of the observer are the
questionnaire. The questions in the questionnaire were chosen to deal with each
barrier confronting small and micro tourism business as identified in the literature
study.
3.8 Data processing and analysis plan
Data analysis refers to the computation of certain measures along with searching for
patterns of relationship that exist among group of data (Kothari, 2000: 151) In this
study quantitative method, cross tabulation especially percentage were used in order
to get information about our research objective and allow the researcher to describe
barriers confronting micro and small enterprises in tourism.

21

CHAPTER FOUR

4.0 RESULTS AND ANALYSIS OF THE STUDY

4.1 The Nature of the MSEs Ownership in the Tourism sector.
4.1.1 Gender of the respondents
The following data was collected to determine the gender of owners or operators
of MSEs.The question analyzed gender of operators of MSEs because it is possible
that gender has an influence on access to credit.
Table 3. Gender orientation of respondents
Gender

Number of respondents

Percentage

Male

43

71.7%

Female

17

28.3%

Total

60

100%

The results show that 71.7% of respondents were male and only 28.3% of
respondents were female. These findings suggest that male were more likely to be
involved in Micro and Small Tourism Enterprise in Zanzibar. The study also found
out that gender was not among the determinants when it comes to access to finance
as financial institutions did not consider gender when issuing finance.

22

4.1.2 Age of respondents

The following data was gathered by analyzing the age profile of respondents. The
aim of this survey was to determine whether access to credit facilities is determined
by age.
Table 4. The age of the respondents
Ages in years

Number of respondents

Percentage

18-25

11

18.3%

26-35

30

50%

36-45

15

25%

46-55

6.7%

The result indicates that 50% of the respondents were in the age groups of 26 to 35
years. 25 % of respondents are in the age group 36 to 45 years, 18.3% were in the
age group of 18 to 25 years and only 6.7% are in group of 46 to 55. The findings
show that the age group of 26 to 35was less likely to access finance facilities from
financial institutions compared to other age groups.
4.1.3 Level of education
The following data was gathered by the researcher in order to determine the level of
education among operators of SMEs. The objective of conducting this survey was
to establish whether access to credit facilities was determined by level of education.

23

Table 5. Level of education

Level of education

Number of respondents

Percentage

Primary education

3.3%

Secondary education

33

55%

Diploma

15

25%

Higher education

10

16.7%

Total

60

100%

The results show most respondents had a secondary education, followed by those
with diploma then higher education and few with primary education. Findings show
that most owners of MSEs were migrants labor from different areas of Tanzania
mainland, Kenya, Uganda and Mauritius that have enough level of education
migrated in Zanzibar due to tourism activities, therefore lack of education was not
among challenges facing them in accessing financial facilities.
This is also proved from other scholars who comment that migrants are an
important part of the workforce in the tourism sector of Zanzibar, constituting about
three quarters of the total workforce in this sector (Stefan and Ute, 2005). In
general, the migrants were found to be active in the trade and have knowledge about
art and craft, Most of those engaged in this business had attended schools. Overall,
a substantial number of those working in the tourism sector were found to have a
higher education (ibid).

24

4.1.4 Position in the business

The following data was gathered by the researcher in order to determine the
position in the business. . The objective of conducting this survey was to establish
whether access to credit facilities is affected by the position in the business.
Table 6. Position in the business
Position

Number of respondents

Percentage

Owner

24

40%

Co-owner

13.3%

Manager

20

33.3%

Employee

13.3%

Total

60

100%

Table 6 shows that 40% of respondents are business owner, whereas 33.3% are
manager followed by co-owner and employee 13.3 % each. The findings show that
most of MSEs were managed by sole owners which act as barrier to access finance
since the financial institutions rarely provide finance for individual owner which is
quite different from other scholar who comment that it is common practice in
businesses for managers or owners to reward themselves with huge amounts of
money before realizing the prospects of the business. This aspect is prevalent
especially in young enterprises. (van Aardt, Bezuidenhout and Mumba, 2008).
4.1.5 Number of employee in the business
To analyse the number of employees among operators of MSEs, the researcher
wanted to assess the number of employees employed in the business. The
feedbacks from respondents were recorded as shown in Table 7:
25

Table 7. Number of employee in the business

Number of employee

Number of respondents

Percentage

1-5

30

50%

6-10

20

33.3%

11-15

11.7%

More than 15

5%

Total

60

100%

Table 7 shows that half of the businesses had between 1 to 5 employees while
33.3% of respondents having employees between 6 and 10 people whereas 11 to 15
of respondents have 11.7% of employees and more than 15 have 5% of employee.
The findings further show that large number of employee were found in micro
enterprise which characterized with limited fixed assets, family labour and little
capital accumulation. These characteristics provide the evidence that MSEs fail to
demonstrate the repayment capability acting as barrier to financial access.
4.1.6 Level of business experience among operators of MSEs
To analyze the level of experience among operators of MSEs among respondents,
the researcher wanted to assess the number of years that respondents have been in
business. The feedback from respondents were recorded as shown in Table 8:
Table 8. Level of business experience among operators of MSEs
Business experience

Number of respondents

Percentage

Less than 1 year

10

16.7%

1-2 year

17

28.3%

More than 2 years

33

55%

Total

60

100%

26

The results show that 55% of respondents had business experience of more than 2
years while 28.3% of respondents had business experience of 1 up to 2 years,
16.7% have business experience of less than 1 years, These findings suggest that
lack of business experience is not among the challenges facing MSEs in accessing
finance.
4.2 Access to Credit and Training in Tourism MSEs
4.2.1 Service offered by the business
The following data was gathered by the researcher in order to determine the
services offered by MSEs on tourism industry.
Table 9. Service offered by the business
Service offered

Number of respondents

Percentage

Accommodation

30

50%

Art and craft

15

25%

Transport

15

25%

Total

60

100%

Table 9 Indicates that 50% of the respondents are in the accommodation sector of
tourism. The art and craft accounts for 25% of the businesses as well as in the
transport sector with 25%. The findings show that the business provide small rate of
the services such as art and craft are likely to face the barrier to access finance
compare to large business like accommodations, since the financial institutions
consider Arts and craft are not able to repay loans or credits.

27

4.2.2 Support during start up

The following data was collected by the researcher to analyze support during MSE
business startup. The objective of asking this question was to determine whether
MSEs were given financial supports during their start up. The feedback from
respondents was recorded as shown in the table 10:
Table 10. Support during start up
Support during start up

Number of respondent

Percentage

Yes

28

46.7%

No

32

53.3%

Total

60

100%

Table 10 shows that 53.3% of respondents did not receive assistance during startup
while only 46.7 % of the respondents indicated that they received support. The
finding show that large number of MSEs do not receive assistance during their start
up despite of different financial institution which surround them.
The following data was gathered by the researcher with the objective of identifying
business areas in which MSEs given support.
Table 11. Business areas where support was given
Business supported areas

Number of respondents

Percentage

Business plan

21.4%

Finance management

14.3%

Marketing management

14.3%

credit

13

46.4%

Others

3.6%

Total

28

100%

28

The response indicates that 46.4% of respondents received assistance during startup, in the area of credit, 21.4% in business plan and the other two business areas
where support was received were financial management (14.3%) and marketing
(14.3%). Also 3.6% of the respondents received support in more than one area.
4.2.3 Current institutional support
There are various institution which provide support to MSEs as recorded below in
table 12.
Table 12. Current institutional support
Institutions

Number of Respondents

Percentage

Banks

32.1%

MKUZA

3.6%

MFIs

10.7%

SACCOS

14

50%

Others

3.6%

Total

28

100%

Table 12. Show that 50% of Micro and Small tourism enterprises receive the
business support from SACCOS, 32.1% receive from Banks, 10.7% receive from
MFIs while MKUZA and Other receive 3.6% each. These findings suggest that
SACCOS provides much support to MSEs compared to other institutions though
SACCOS provide much support but still does not close supply and demand of
finance to MSEs, due this situation MSEs face the barrier to access finance.

29

4.2.4 Awareness about support institutions

The following data was gathered to analysing the awareness of MSEs Operators on
institutions that provide support.
Table 13. Awareness about support institutions
Institutional awareness

Number of respondents

Percentage

Business colleagues

14.3%

Media

11

39.3%

Friends

13

46.4%

Total

28

100%

About 46.4% of respondents become aware on existence of supporting institutions

through friends while 39.3% of respondents were informed by media and 14.3% of
respondents have been made aware by business colleagues. The findings signifies
that MSEs were aware on supporting institutions through various ways, but still
they lack requirements and conditions needed by those supporting institutions,
hence MSEs fail to access finance.
4.2.7 Training during business start up
The following data was collected by the researcher to analyze Trainings provided
during business start-up. The objective of asking this question was to determine
whether MSEs were given Training during business start-up. The feedback from
respondents was recorded as shown in the table 16:

30

Table 16. Training during business start up

Training during start up

Number of respondents

Percentage

Yes

43

71.7%

No

17

28.3%

Total

60

100%

About 71.7% of respondents have received training during their business startup
while 28.3% have not undergone any training. The findings reveal that many
respondents had acquired training compared to previous studies which comments
that Small and Micro businesses also lack in critical skills that are needed by a
modern company to operate particularly in a competitive environment. Nieman et
al. (2003) mention that there is generally a shortage of management and leadership
skills in many small and micro businesses. Julien (1998) further indicates that in
view of their limited resources, small and micro businesses tend to ignore this area
completely or they do not give it any adequate attention. Longenecker et al. (1996)
define the purpose of training as preparing workers to perform duties for which they
have been hired for more efficiently.
4.3 Barriers to Credit Access in Zanzibar MSEs
4.3.1 Length of registration period
The following data was gathered by the researcher in order to determine the length
of business registration among MSEs. The objective of conducting this survey was
to determine whether access to credit facilities is affected by the enterprises
registration.
31

Table 14. Length of registration period

Time

Number of respondents

Percentage

Less than 3 months

31

51.7%

3- 6 months

20

33.3%

More than 6 months

15%

Total

60

100%

51.7 % of the respondents indicate that the registration period is less than 3 months
while 33.3% of respondents show that the registration period is between 3 and 6
months. Only 15% of respondents indicate that the registration period took more
than six months. The findings suggest that large number of respondents registered
their business in less than three months but the registration was one among the
determinants that considered in accessing credits to MSEs.
4.3.2 Marketing medium
The marketing medium currently used by the respondents is illustrated in
Table 15. Marketing medium
Marketing medium

Number of respondents

Percentage

Newspapers

6.8%

Pamphlets

14

18.9%

Word of mouth

11

14.9%

Radio

2.7%

None

21

28.4%

Others

21

28.4%

Total

64

100%

32

Table 15 shows that 28.4% of respondents do not advertise their business, 28.4% of
respondents used different ways and 18.9% of respondents use pamphlets while
14.9% used word of mouth. The newspapers got a response of 6.8% from the
respondents while radio got 2.7%.
4.3.3 Skills received
The following data was collected by the researcher to identify Skills received by
MSEs. The objective of asking this question was to determine whether MSEs were
receiving skills or not. The feedback from respondents was recorded as shown in
table 17:
Table 17. Skills received
Skills received

Number of respondents

Percentage

General management

22

51.2%

Financial management

16.3%

Marketing

10

23.3%

Other

9.3%

Total

43

100%

Table 17 indicates that 51.2% of respondents were trained in general management

while 23.3% of respondents received training in marketing management and 16.3%
of respondents receive financial management training as well as 9.3% of
respondents receive different trainings. The finding suggest that there was enough
provision of education and skills to MSEs which is contrary from other study which
suggest that Skills and education rank higher as major obstacles to enterprise

33

operations and growth. (Zanzibar Human Development Report towards Pro Poor
Growth, 2009).
4.3.4 Fund for start-up business
The following data was gathered by the researcher in order to find out where MSEs
got fund for startup business.
Table 18. Fund for start-up business
Fund for start-up business

Number of respondents

Percentage

Bank loans

11.7%

Own saving

30

50%

Business partners

13.3%

Friends

3.3%

Family

13

21.7%

Total

60

100%

Table 18 indicates that half of micro and small tourism businesses used their own
savings to start their businesses, while 21.7% of respondents got funds from their
family, 13.3% of respondents from business partners, and 11.7% of respondents
from bank loan and 3.3% of respondents from their friends. The study suggests that
the accessibility of credits to MSEs was so difficult that is why most of MSEs start
their business by their own servings.
4.3.5 How easy it is to get funds
This data was gathered to show whether respondents find easy to get funds from
different institutions.
34

Table 19. Easy to get funds

Easy to get funds

Number of respondents

Percentage

Yes

25

41.7%

No

35

58.3%

Total

60

100%

Table 19 indicates that 58% of respondents said it has not been easy to obtain funds
while 42% of respondents said that it has been easy. The study suggests that it is
very difficult to access funds for MSEs due to various problems.
4.3.6 Problems in getting finance
To establish the problems that face MSEs in getting finance, the researcher asked
respondents to mention the problems that hinder them to obtain finance. The
feedback from respondents was recorded as shown in table 20:
Table 20. Problems in getting finance
Problems

Number of respondents

Percentage

Credit profile

8.6%

Collateral

5.7%

Business plan

20%

Assets

23

65.7%

Total

35

100%

Table 20 indicates that respondents viewed assets as a problem in obtaining funds

for their businesses. This is seen in the 65.7% given to the requirements. The
business plan was given a 20 % response while credit profile is given 8.6%.
Furthermore 5.7% of respondents view collateral as problem to access funds. The
35

study suggest that the major problem that face MSEs to access funds was collateral
which acts as security to the financial institutions for their funds provided to MSEs.
Also other scholars have commented on this point and say the barrier for MSEs in
accessing credit is the security or collateral requirements of the banks (Heidelberg, 2008).
MSEs often do not have assets that qualify as security for a loan, or if they have the assets
they do not have proper titles. Personal guarantors are another asset for security and
Equipment and other moveable assets used as collateral. Many banks however, reject
moveable assets as securities, simply because they can literally be moved out of reach and
be inaccessible for the bank in case of default. (ibid).

4.3.7 Management of finance

This data was gathered to identify the Person who manages finance in the business.
Table 21. Management of finance
Management of finance

Number of respondent

Percentage

Co-owner

36

60%

manager

15

25%

Accountant

9%

60% of the Co- owners of micro and small businesses manage their finances. Other
than the co-owner, manager was indicated by 25% while the accountant represents
9%.The study reveals that most of MSEs business did not have an accountants who
manage their business as a result of poor financial records for the business which
act as barrier in accessing credits from financial institutions.
The study relates with scholar who comments that Banks requirement of financial
records on the past performance of the enterprise. Many MSEs have difficulties in
36

providing these. The official financial statements included the cash flow, balance
sheet and profit and loss statements. Usually, bankers evaluate cash flow statements
seriously. The constraint put on MSEs access to finance by the level of
requirements of financial records varies between the different financial institutions.
Those who targeted mainly micro enterprises did not generally require balance
sheets or profit and loss statements (Heidelberg, 2008).
4.3.8 Skills that were lacking during start-up
After finding out that lack of entrepreneurship skills among operators of SMEs was
among the challenges facing SMEs in accessing credit facilities from banks and
other financial institutions, the researcher asked respondents to mention what type
of entrepreneurship skills they lacked. The feedback from respondents was recorded
as shown in the table below:
Table 22. Skills lacking during start-up
Skills lacked

Number of respondents

Percentage

Communication

13.1%

Negotiation

1.7%

Time management

3.3%

Conflict Management

6.6%

Financial management

17

27.9%

Marketing management

20

32.8%

General management

13.1%

Other skill

1.7%

Total

61

100%

Table 22 shows that the majority of micro and small tourism businesses lacked
marketing skills when they started. Respondents in the study gave 32.8% for
37

marketing skills. The respondents have also lack on financial management 27.9%,
General management and Communication account 13.1% of respondents. Other
skills that lack when they started includes 6.6% of Conflict Management, 3.3% of
Time management while Negotiation and other account for 1.7% each.
Marketing skills, financial management, general and communication management
are generally termed as entrepreneurial skills; therefore the findings suggest that
lack of entrepreneurship skills was among the challenges facing MSEs in accessing
credits facilities.
4.3.9 The most important business skills
The following data was collected by the researcher to identify the most important
business skills required by MSEs.
Table 23. The most important business skills

Skill

Number of respondents

Percentage

Communication

8.6%

Negotiation

1.4%

Conflict management

5.7%

Financial management

15

21.4%

General management

5.7%

Marketing management

39

55.7%

Others

1.4%

Total

70

100%

Table 23 indicates that marketing and financial management skills were the most
important skills to run a business according to respondents. This is indicated by
55.7% and 21.4% given to the two skills respectively. Time management skill is
38

rated by 8.6% of respondents, and the skills, which are considered least important
by respondents, are conflict management and general management skills with 5.7%
given by respondents to each of the skills as well as negotiation skill with 1.4%.
The findings suggest that provision of entrepreneurship skills such as marketing,
financial management, time management, conflict management and general
management to MSEs will reduce some barriers to access credits from supporting
institutions.
4.4 Summary of the findings
The availability of finance in business was the most crucial element of this study in
particular and the relationship between MSEs enterprises and their institutional
support in general. Concerns about finance conditions were found to be spread in
the area of interest, as other important issues in the overall economy of Tanzania.
The results of the study indicated that financial access was constrained by MSE
factors as well as financial institutional factors. Statistical analysis of data revealed
evidence on limit factors against MSEs access to finance. Accordingly, poor
financial records, poor fulfillment of collateral requirement, demonstration of
repayment capability, failure to prepare and present business plan, mismanagement
of resource, banks reluctance to lend and such were found to be on the bottom of
poor financial access for MSEs. They hence determine the extents to which MSE
can access finance facilities, other thing being equal.

39

CHAPTER FIVE

5.0 CONCLUSION AND RECOMMENDATIONS

This chapter presents the conclusions and recommendations made with regard to
the study findings and objectives.
5.1 Conclusions
The study found out that female operators of MSEs faced more challenges in
accessing credit facilities from financial institutions compared to their male
counterparts, mostly due to lack of collateral. In addition, younger operators of
MSEs faced more challenges in accessing credit facilities because banks consider
younger people risky when it comes to credit management since younger people
are more likely to default on their loans.
Among the challenges facing MSEs in accessing credit facilities was lack of
collateral among operators of MSEs. Other challenges were identified to be lack of
business experience and

entrepreneurship

skills

such

as

book

keeping,

marketing, credit management and customer care skills. All these skills are very
important to MSEs, from the stage of starting up business, to the stage of running
an existing business and accessing credits.

40

5.2 Recommendations
To address the barriers faced by MSEs in accessing credit facilities from
financial institutions, the researcher recommends the following:
i.

Banks and other financial institutions should start offering credit

management training to MSEs in order to help them to repay loans in time.

ii.

The government should support banks and financial institutions that

offer credit facilities to MSEs because in doing so, they will be in a better
position to assist more MSEs.

iii.

Bank and other financial institutions should conduct awareness campaigns

among MSEs to make them aware of various credit facilities available
for MSEs.

iv.

Banks and financial institutions should encourage MSEs to apply for

credit and conduct seminars and workshops to enhance their chances of
obtaining credit.

v.

Training should be facilitated to assist MSEs in preparing business plans

and educate MSEs about requirements for loan applications.

41

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conference, 25 -27 January 2010. Las Vegas: USA.
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Roland, O. (2001). National Park Management - A Study of US National Parks with
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43

APPENDIX ONE
Dear respondents,
We are students of Tumaini University College at Iringa pursuing Bachelor of Arts
in Cultural Anthropology and Tourism. We are conducting a research on the
barriers confronting micro and small tourism enterprises: a case study Zanzibar,
your ideas and opinions that you provide for this topic will be useful in the
advancement of our research and the development of micro tourism enterprises as
well as small enterprises in Zanzibar. We would appreciate a small amount of your
time and supports for completion of this questionnaire and give out the opinions to
your understanding, there are no wrong or right on answers. So please be free to
express yourself and your information will be kept confidential.
QUESTIONNAIRE
Instruction: Tick the appropriate block
1. What is your gender?
i.

Male

( )

ii.

Female

( )

2. What is your age?

i.

18 25

( )

ii.

26 35

( )

iii.

36 45

( )

iv.

46 55

( )

44

3. Level of education
i.

Primary education

ii.

Secondary education

iii.

Diploma education

iv.

Higher education

4. What is your position in the business?

i.

Owner

ii.

Co owner

iii.

Manager

iv.

Employee

5. How many employees does your company employ?

i.

15

ii.

6 10

iii.

11 15

iv.

More than 15

6. For how long has your business been in operation?

i.

Less than 1 year

ii.

1 2 years

iii.

More than 2 years

45

7. What services is your business offering?

i.

Accommodation

ii.

Art and craft

iii.

Transport

iv.

Other specify

8. Did you receive any assistance from any institution or person during start
up?
i.

Yes

ii.

No

a) If yes, in which business areas did these institutions give support?

i.

Business plan

ii.

Finance management

iii.

Marketing

iv.

Credit

v.

Others (Describe) ..

46

9. From which of the following institutions do you receive business support?

i.

Banks

ii.

MKUZA

iii.

MFIs

iv.

SACCOS

10. How did you become aware of this institution?

i.

Business colleagues

ii.

Media

iii.

Friends

iv.

Other (specify) .

11. How long did it take to register your business?

i.

Less than 3 months

ii.

3- 6 months

iii.

More than 6 Months

12. Which marketing medium do you currently use to market your business?
i.

Newspapers

ii.

Pamphlets

iii.

Radio

iv.

Word-of-mouth

v.

None

vi.

Other (specify).
47

13. Did you receive any training before starting the business?
i.

Yes

ii.

No

a) If yes, in which area(s) did you get training?

i.

General management

ii.

Financial management

iii.

Marketing

iv.

Other (specify).

14. Where did you get funds to start a business?

i.

Bank loan

ii.

Own saving

iii.

Business partners

iv.

Friends

v.

Family

15. Was it easy to obtain funds for your business?

i.

Yes

ii.

No

48

a). If no, which requirements prevented you from qualifying to obtain funds from
finance

institutions?
i.

Good credit profile

ii.

Collateral

iii.

Business plan

iv.

Assets

v.

Other (specify) ..

16. Who manages the finances of your business?

i.

Co-owner

ii.

Manager

iii.

Accountant

17. Which of the following skills were you lacking when you were starting
your tourism business? (You may indicate more than one option)
i.

Communication

ii.

Negotiation

iii.

Time management

iv.

Conflict management

v.

Financial management

vi.

Marketing management

vii.

General management

viii.

Other (specify)

49

18. Which of the following skills do you regard as important for a business in
the tourism sector? (You may indicate more than one option).
i.

Communication

ii.

Negotiation

iii.

Conflict management

iv.

Financial management

v.

General management

vi.

Marketing management

vii.

Other (specify)

50