Financial Management Practices and Growth of Micro, SMEs of Tanzania

Micro, SMEs are seen as a motivating force for the promotion of an economy and they contribute enormously to the economic growth of the organization particularly in Tanzania. Due to the lack of understanding of financial management combined with the uncertainty of the business environment often leads Micro, Small and Medium Enterprises to serious problems concerning financial growth. The significant Objective of this study was to explore financial management practices and growth of Micro, SMEs of Tanzania. This research was guided by the following objectives: financial innovations, investing activities, risk management practices and working capital management. Since the Micro, SME population is quite high, the target population for this study was estimated at over 400 management staff from selected Micro, SMEs in Dar es Salaam. The methodology used was simple random sampling technique to select the sample of 85 respondents. Primary data was collected using a self-administered questionnaire. Content analysis was used to analyze qualitative data. The model applied to determine the relative importance of each of the four variables with respect to the growth of Micro, SMEs was multivariate regression model. The study discovered that financial innovations influence the growth of Micro, SMEs of Tanzania to abundant scope. The study recognized that the reason for innovation in an organization growth is to make profit for particular company. Similarly, Investment described as the redistribution of resources from being consumed today to generating benefits in the future. Improvement of an effective business support system is also an important condition for the success of investment capacity building. Respondents strongly agreed that investing requires business support organizations which have a demonstrated capability of penetrating the Micro, SMEs organization. The study concludes that financial innovations influence the growth of Micro, SMEs of Tanzania to a great scope and that the aim for innovation in an enterprise is to make a profit. Consequently, Risk management has become fragment of a strategic constituent of the modern organization‟s survival and development. Finally, statistical significance between working capital and organization growth, the study found that there is essential need for a compromise between receivables and holding inventory when the organization is to achieve the required profits. Owner/managers of micro, SMEs are recommended by the study that, they should embrace financial innovations in order to produce long term stability and for the firm to have competences. The study also recommends that it is important for Micro, SMEs to invest so that investments can grow to competition against inflation and future reservations. Managers should increase an effective business support system as a key condition for the success of investment capacity building. The study found that there is a need of looking the challenges facing Micro, SMEs of Tanzania.