SMEs contribute to employment, Gross Domestic Product (GDP) enhancement,
innovations, human resource development and poverty alleviation. It has been found that
it is not only the big businesses that provide the foundations of the nations economies,
but small enterprises also play significant role in developing the economies of nations.
However, the pace shown among SMEs that accessed credit guarantee is not promising.
The general objective of the study was to examine the role of credit guarantee in
promoting SMEs development through CRDB Bank in collaboration with PASS in
Morogoro municipality.
Case study research design was utilized in the methodology. A sample size of 50
respondents including SMEs owners and manager were used in the study. Data collected
were analysed using excel software to obtain frequency and percentage distribution as
major variables.
The findings indicated that 80% of respondents argued that they have knowledge on how
to access credit guarantee from financial or private sector trusts as assisted by PASS
after collaborating banks accept the client with the PASS business plan and the way
partial credit guarantee from PASS enable SMEs to top up in case of inadequate
collateral. Likewise, 87% of respondents stated that loan conditions direct the
management of the SMEs to influence the credit guarantors or lenders to either give or
deny the applications from the SMEs. This has be so from the fact that, without showing
the ability to access and utilize the loan well the credit guarantee would be deemed to
nothing while channelling funds to the wrong client. Furthermore, 80% of respondents
reported that regulatory framework on accessing guarantee seemed to hinder SMEs to
access credit easily. With these conditionalities some SMEs unable to access the credit
guarantee.
It is concluded that SMEs‟ needs framework that has profound effect on their
performance as the situation and conditions of the borrowing SMEs and loan
characteristics impinge SMEs to access loans and ultimately non-repayments.