Barriers to Access Finance of Micro and Small Tourism Enterprises in Zanzibar

7/23/2019 Barriers to Access Finance of Micro and Small Tourism Enterprises in Zanzibar

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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)


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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


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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


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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.


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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.


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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.


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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 ........................................................................................... 11.1 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


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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 ................................................................... 183.1 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


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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 ..................264.2 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


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REFERENCES.....................................................................................................42

APPENDIX ONE .................................................................................................44

QUESTIONNAIRE..............................................................................................44


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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


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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


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LIST OF FIGURES

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


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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


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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


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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).


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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.


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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.


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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.


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Figure 1: Conceptual framework model

GOVERNMENT SUPPORT

REGULATORY

FRAMEWORK

Banks

NGOs

- SIDO

- MKUZA

GOOD

ENVIRONMENTS

Training and

education

Policy andregulations

Fair Taxation

Capital

Markets

MICRO AND SMALL

ENTERPRISES

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


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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


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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.


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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.


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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.


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

Types/

categories

No.

employee

Characteristics Asset base for

accumulation

Self-employedpoor

0 Mostly part-time labour,temporary, sometimesseasonal activity, familybased labour.Main aim additionalfamily income.

No permanent assetbase, no capitalaccumulation,permanent cashshortage. Businessonly as survivalstrategy.

Micro

enterprise

1-9 Not focused on economic

expansion.Fixed business premises,limited fixed assets.Family labour, informalor formal status.Little orientation togrowth.Tourism is one ofmultiple family incomesources

Permanent

availability of liquidassets, some savingLittle capitalaccumulation.Income stabilizationas main purpose.

Small

enterprise

10-49 Partially formalized,

operating licenseProfit/growth orientedSpecialized tourismbusiness possible.

Business as main

strategy, non-permanentavailabilityof fixed assets,capitalaccumulation,income andreturn 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)


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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).


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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.


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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


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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).


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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).


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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.


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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.


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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 Transportation Arts& Craft TOTAL

30 15 15 60


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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:


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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.


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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.


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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 4 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.


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Table 5. Level of education

Level of education Number of respondents Percentage

Primary education 2 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).


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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 8 13.3%

Manager 20 33.3%

Employee 8 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:


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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 7 11.7%

More than 15 3 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%


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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.


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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 PercentageYes 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 6 21.4%

Finance management 4 14.3%

Marketing management 4 14.3%

credit 13 46.4%

Others 1 3.6%

Total 28 100%


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The response indicates that 46.4% of respondents received assistance during start-

up, 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 9 32.1%

MKUZA 1 3.6%

MFIs 3 10.7%

SACCOS 14 50%Others 1 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.


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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 4 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:


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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.


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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 9 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 5 6.8%

Pamphlets 14 18.9%

Word of mouth 11 14.9%

Radio 2 2.7%

None 21 28.4%

Others 21 28.4%

Total 64 100%


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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 7 16.3%

Marketing 10 23.3%

Other 4 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


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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 7 11.7%

Own saving 30 50%

Business partners 8 13.3%

Friends 2 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.


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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 3 8.6%

Collateral 2 5.7%

Business plan 7 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


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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 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


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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 8 13.1%

Negotiation 1 1.7%

Time management 2 3.3%

Conflict Management 4 6.6%


Marketing management 20 32.8%


Other skill 1 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


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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 6 8.6%

Negotiation 1 1.4%

Conflict management 4 5.7%



Marketing management 39 55.7%Others 1 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


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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.


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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.


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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.


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Zeelie, J, De Beer, A, Jacobs, H, Nieuwenhuizen, C, Rossouw, D, Stapelberg, J. andWatson, H. (1998).Entrepreneurial skills. (2nd ed). Cape Town. Juta.


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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. 1825 ( )

ii. 2635 ( )

iii. 3645 ( )

iv. 4655 ( )


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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. Coowner ( )

iii. Manager ( )

iv. Employee ( )

5. How many employees does your company employ?

i. 15 ( )

ii. 610 ( )

iii. 1115 ( )

iv. More than 15 ( )

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

i. Less than 1 year ( )

ii. 12 years ( )

iii. More than 2 years ( )


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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) ..


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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).


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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 ( )


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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)


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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)

Documents

Barriers to Access Finance of Micro and Small Tourism Enterprises in Zanzibar