—Micro, Small and Medium Enterprises (MSMEs)
play a significant role in income generation, job creation,
poverty reduction and reducing income inequality. However,
MSMEs from developing countries are exposed to several
challenges in their business operations. Among others, access to
external financing has been cited to be the most pressing
challenge for MSMEs in developing economies and Tanzania in
particular. Using a desk review methodology, this paper
explores in detail the causes of the problem and mechanisms
currently put in place to address these. Briefly, the paper
delineates how the structural mismatch between mainstream
funding requirements and unique characteristics of MSMEs
has led to market failure. It further provides insights on
innovative financing strategy, which may be a better alternative
to circumvent the problem.
—MSMEs, financial institutions, development
The author is with University of Stellenbosch Business School (AACSB,
EQUIS, AMBAs), South Africa (e-mail: firstname.lastname@example.org).
Cite: Nyankomo Marwa, "Micro, Small and Medium Enterprises’ External Financing Challenges: The Role of Formal Financial Institutions and Development Finance Intervention in Tanzania," International Journal of Trade, Economics and Finance vol.5, no.3, pp. 230-234, 2014.