The Impact of Development Grants on Growth of Smes in Rural Tanzania

Graduate Research Pre-Proposal Summery Statement of Intended Research Topic (CONCEPT PAPER) 1.

Topic of Research: The suggested research topic is: “The Impact of Development Grants on Growth of SMEs in Rural Tanzania”. 2. Brief Statement of the Research Problem: Tanzania has recognised the importance of SMEs to the economic developments of the country, and has taken various measures to support their growth. However, despite of the efforts to enhance SMEs growth into the country, still a number of factors limit their growth.One of the many limiting factors is lack of capital to start up businesses by many potential entrepreneurs. This is coupled with the unwillingness of microfinance institutions (MFI) in the country to extend soft loans to rural entrepreneurs for various reasons. As a measure to ensure the rural entrepreneurs get capital to start up small businesses for income generation, the government in collaboration with other development agents have resorted to giving grants to rural communities so to start up small businesses and generate income. Various arguments have been put forward for and against this motive.

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There are those who support extending grants to business start ups arguing that it enhances growth of SMEs by providing capital to the needy which is otherwise could not be obtained. Others oppose the decision with arguments that grants do not support sustainable growth of SMEs but create dependence syndrome instead (Battle, P. (2007), Khan, M. (2008)). I therefore propose to conduct a study to find out the impact of grants on growth of SMEs in Tanzania, especially the rural areas where MFI credits are minimal or non-existent. I shall take the ongoing programme under TASAF as a case study.

Currently TASAF is giving grants to small groups of vulnerable individuals as capital to start up small businesses for income generation and growth. To what extent these grants support growth of the groups? Is sufficient number of groups grew up into sustainable business ventures? 3. Expected Achievements: This study will provide qualitative and quantitative information of the contribution of grants to the growth of SMEs in the country. The information is expected to be vital to policy making towards sustainable and enhanced growth of SMEs and entrepreneurship in the country. 4.

Research methods to be used:It is planned that the study shall be carried out through a survey research. Various donors support individuals and groups to start up income generating activities by providing them with funds to finance business start ups. Such programmes include TASAF, SIDO, Compassion international (NGO) etc. These donors currently are running programmes that support individuals and groups interventions to start up and run income generating programmes. The beneficiaries are provided with cash grants that form initial capital to start up small businesses of their choice for the purpose to generate incomes for their subsistence and then development.A survey research with the use of supervised questionnaire is regarded to be the best method to collect data for the study.

This method is regarded to be appropriate for the study because it will provide the respondents with guidance on providing answers to the questions and provide further elaborations on questions that may happen to be ambiguous to them. Also the method will facilitate the researcher to collect other qualitative data that otherwise will not be easy to collect.

Author: Katie George


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