Causes of Loan Delinquency by Small and Medium Enterprises in Dar Es Salaam Tanzania

Abstract

The study aimed at determining the Causes of Loan delinquency in small and medium Enterprises operating in Dar es Salaam Tanzania with a focus on factors touching on the SMES that is , funds utilization practices, owner management competence, entrepreneurial risk taking behaviour and level of innovativeness. The Study followed an inductive process where both primary and secondary data collection tools were used to achieve the results. Both descriptive and inferential analysis (Correlation and regression analysis) was used. Data was analysed using SPSS version 22 and the findings revealed that funds utilization practices positively and significantly affect loan delinquency among SMEs in Dares Salaam town. This implies that an increase in loans utilization practices such as borrowing funds to expand into new markets, using loans whenever there is a need to diversify and using borrowed funds to undertake new ventures increases loan delinquency. The study findings also indicated that management competence negatively affects loan delinquency among the SMEs investigated. It was also established that innovativeness has a negative and not significant relationship with loan delinquency among SMEs in Dares Salaam. This implies that experimentation and introduction of new products or services anytime and incorporation of the employee’s ideas into the organization leads to a small effect on reduction of loan delinquency.

Key Words: Funds Utilization Practices, Owner Management Competence, Entrepreneurial Risk Taking Behaviour, Level of Innovativeness, Loan Delinquency, Small and Medium Enterprises, Dares Salaam Tanzania