European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.11, No.33, 2019 1 A Review of Factors Affecting the Growth of Small and Medium Enterprises (SMEs) in Tanzania Jesca Mhoja Nkwabi * Leodger B. Mboya Doctoral candidate of the University of the West of Scotland (UWS), School of Business and Creative Industries, 235 Southwark Bridge Rd, London SE1 6NP Abstract The growth of Small and Medium Enterprises (SMEs) globally is dependent upon a conducive business environment. However, in Tanzania, SMEs face several constraints such as limited finances, poor market accessibility, low entrepreneurial knowledge and bureaucracy which hinders their growth. This paper aims to assess the factors impeding the growth of SMEs in Tanzania. Factors such as a lack of business training, capital constraints, a lack of finance, poor infrastructure, a lack of collateral, poor production, poor technologies, tight regulations, corruption, poor market accessibility, the motivation of the business owners, limited access to information, a lack of human competencies and inadequate raw materials were measured. A mixed-method approach was used in this study, inclusive of content analysis to extract the constraints from the 21 items of literature in Tanzania. Thereafter, a quantitative approach was applied where descriptive statistics were used to determine the frequency and percentage of the factors in order to extract the most significant variables affecting SME growth in Tanzania. The findings reveal that Tanzanian SME growth is mostly impacted by financial constraints, capital constraints, poor technology and tight regulations. The study recommends that financial assistance through lowering the interest rates and simplifying the borrowing procedures must be given to SMEs to enable them to avail the necessary finance and capital for their business Also the government must support SMEs by simplifying the regulations for SMEs such as levying taxes. Business training must be provided to the SMEs by government organisation such as the Small Industries Development Organisation (SIDO) to facilitate business knowledge. Keywords: SME, challenges, growth. DOI: 10.7176/EJBM/11-33-01 Publication date: November 30 th 2019 1. Introduction The Tanzanian SME sector has been recognised as a critical sector in the creation of employment opportunities, the generation of income and in its contribution to GDP and economic growth. It is estimated that there are over 3 million SMEs in Tanzania that are engaged in various businesses such as manufacturing, retail and trade, agricultural and services (Mashenene & Rumanyika, 2014). In Tanzania, small scale businesses are defined according to the number of employees and capital invested in machinery. Therefore a micro-enterprise comprises of up to 5 people with a minimum capital requirement of up to 5 million Tanzanian Shillings (TZS), a small enterprise comprises of 5-49 employees with a minimum capital of 5-200 million (TZS) and a medium-scale enterprise comprises up to 100 employees with a minimum capital of 200-800 employees. In 2003, the government introduced the SME development policy that was aimed at alleviating poverty and improving the SME sector. The same policy was reviewed in 2013 which documented that despite the government efforts to improve the sector, SMEs still are faced with challenges such as a failure to compete in international markets, financial constraints, underproduction, poor supply chain management, technological difficulties, a lack of access to raw materials and a low business registration rate. Despite an attempt by previous researchers (Mashenene & Rumanyika, 2014; Kimathi, 2015; Anderson, 2017) to document SME constraints, these issues still persist and as a result, SMEs still undergo challenges which force most of them to go out of business. An explanation of such persistence that can be given is that the country has limited resources and so addressing most of the challenges can prove to be difficult. This research, therefore, aims to evaluate the critical impediments hindering SME growth in order to provide feasible solutions on how these challenges can be tackled to facilitate SME growth. 2.Literature review Business impediments have been recognised as stumbling blocks standing in the way of SME growth around the globe. Mashenene & Rumanyika (2014) reported inadequate business training, insufficient capital and an anti- entrepreneurial culture to be the major constraints affecting SMEs in Tanzania. Bilal, Khan & Akoorie’s (2016) study on South Asian countries reported financial constraints to be the major impediment affecting SMEs in Pakistan and India. The same was reported by Wang (2016), who found external financing to be a major constraint to growth in SMEs in developing nations. Bouazza, Ardjouman & Abada (2015) reported the business environmental factors, legal and regulatory frameworks, access to external financing and human resource capacities to be the major constraints affecting Algerian SMEs. Baporikar, Nambira & Gomxos (2016) found that