THEO MUSHI
SMALL and Medium-scale enterprises (SMEs) are vital in all productive
sectors of the economy so as to speed up the pace of industrialization.
SMEs are found in all the productive sectors of the economy – including
manufacturing, agro-processing, mining, fishing, tourism and commerce.
However, they invariably face the problem if access to capital because of
lack of collateral on their part to pledge to potential creditors: banks and
other financial institutions.
Through the effort of Small Industries Development Organisation (SIDO) have
culminated into the launching and increasing the budget allocation of SME
Credit Guarantee Scheme. This will enable banks to lend to SMEs without
fearing the risk of default. The government has also increased allocation
to the National Entrepreneurship Development Fund (NEDF) administered by
SIDO.
There have been thousand of SME operators loans beneficiaries from NEDF and
the loan recovery is as high as 85% in both rural and urban areas. SIDO has
conducted entrepreneurship training for SMEs especially in the food
processing sector. In a bid to expand and explore markets for products of
SMEs SIDO has organize zonal SME exhibitions to show the range of products
produced by SMEs in food , blaksmithery, machines, textiles and garments as
traditional medicines and handicrafts.
There are other loan facilities for SMES from well SACCOS and the Enterprise
Growth Market of stock exchange which will be launched will enable SMEs
raise capital. SME activities need to be properly managed and planed so as
to operate profitably and repay bank loans. This requires to develop
successful business strategy. This strategy should match vision and mission
of the business.
The strategies should include what type of goods and services the investor
wants to offer and this includes future projections. An SME operation
should determine what kind of customers they intend to serve and which areas
within Tanzania, East Africa, Africa and overseas they target to produce for
should they expand their businesses.
SMEs should identity who are their competitors and what competitive
strategies they should deploy in order to thrive and reach business targets.
SME operators should evaluate their business environment and a serious
entrepreneurs looking for success in business will initially carry out an
environmental assessment impact and this is a part of social responsibility
like creation of employment.
SMEs should assess their present and future capacity and determine their
ability, under standing and scope of vision for the business to aspire to
undertake by evaluating capital requirements, quality of goods and services
and knowledge of customers and their customs. Other relevant issues are the
capacity to understand business competitors and knowledge and skill of the
business. An SME entrepreneur must also understand business competitors and
knowledge and skill of the business.
An SME entrepreneur must also understand his weaknesses that may affect the
business and this includes lack of customer focus, lack of techniques for
overcoming competition and supply of goods and services not timely
delivered. An SME operator should explore opportunities and prepare the
face threats. The opportunities are there for access to external capital in
form of aid, grants and loans.
Other opportunities are conducive business environmental which will attract
investors to enter partnerships with local entrepreneurs and especially
large corporates to improve the quality of goods produced. The coming East
African Common market will offer opportunities to expand the market for
their producers in Kenya, Uganda, Rwanda and Burundi.
Potential threats to be observed by SME managements are internal
competition, from multinational companies, investing in the country. Others
are change in legislations which do not favour local industries or business
enterprises.
The business environment is difficult in Tanzania for SMES to conduct
effective business due to multiple licenses and permits and contract
enforcement. Under the Business Environment Strengthening in Tanzania
programme (BEST), the Government is trying to streamline and simplify the
procedures and regulations with a view to facilitate businesses.