Capabilities of business development service providers’ in service delivery to small and medium enterprises in Arusha city and Moshi municipality
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Date
2022
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Publisher
Sokoine University of Agriculture
Abstract
Despite the various interventions aimed at supporting Micro, Small and Medium Enterprises
(MSMEs) in Tanzania, the challenges facing their development have persisted. Business
Development Services (BDS) providers have an instrumental role in MSMEs development.
However, the question of capability of BDS providers and hence their effectiveness in delivering
BDS to MSMEs is yet to be adequately addressed.
The main objective of this study was to assess BDS providers’ capabilities in service delivery to
MSMEs in Arusha City Council and Moshi Municipality. Specifically, the study analyzed BDSPs
internal resources endowment, service delivery pathways and MSMEs absorptive capacity.
Business Development Service Providers are recognized as public and private firms which
provide a range of non-financial services to MSMEs.
The study employed the cross-sectional design and mixed approaches namely qualitative and
quantitative. A sample size of 254 MSMEs respondents was chosen using a simple random
sampling technique and a sample size of 65 BDS providers were chosen using a purposive
sampling technique. Primary data were collected using Key Informants Interviews (KII), a
questionnaire survey, documentary review and focus group discussions (FGDs) methods.
Qualitative data were analysed using content analysis and quantitative data were analysed using
the Statistical Package of Social Science (SPSS) software, for descriptive statistics including
frequencies and percentages.
The study results revealed that, most of the BDS providers had inadequate human resources to
match the appropriate service delivery. However, MSMEs were highly satisfied with the
personnel expertise and accessibility to services but they were dissatisfied with the costs of the
service and increased operating expenses. Increased business operating expenses were caused by
uncontrolled rent on business premises fluctuating transportations costs, raw material costs, and price fluctuations of raw materials. However, despite the inadequate resources of BDS providers,
the impact of their services was significant in various MSMEs. The reported impacts derived from
BDS provided to MSMEs were, increased ability to access inputs and loan, increased ability to
run businesses and use of technology, increased yield and business diversification.
The majority of BDS providers were private entities and mainly provided market access, provision
of input supply, and alternative financing to MSMEs. This implies that most of the service
providers in the study area w ere market oriented. However, there was a significant difference
with regard to public BDS providers doing better in provision of infrastructure development and
policy/advocacy because they are long lived and capital intensive.
However, the most preferred service delivery pathways by BDS providers were training, seminars
and workshop, technical demonstration centers and trade exhibitions, these were easier to organize
and involved a large number of their clients. The findings also revealed the difficulty in
determining the most appropriate pathway to follow in delivering BDS to MSMEs. The reasons
being that in some cases, BDS providers used more than one delivery pathway. However, the
study revealed a lack of generic service delivery pathway since each BDS provider has its own
focus and work independently while MSMEs differed from one enterprise to another.
Similarly, the study findings indicated that, the majority of MSMEs owners had secondary
education and an experience of one to three years business management. Also, the majority of
enterprises were micro with capital of more than or equal to Shs. <5million and more than or
equal to < 5 employees. This indicates that, the majority of MSMEs had the capacity to identify
appropriate BDS to meet their needs although an experience of 1-3 years in business management
could impair their capacity to adopt to new knowledge timely. The findings also show that, the
majority of enterprises were micro enterprises. This depicts low capital and therefore low ability
to access and apply BDS for innovation, although they can access BDS through sponsored
trainings, incubators and networking that allow sharing of resources and information. Similarly, it was observed that, despite the government's efforts to promote public BDS providers
by providing incentives, access to BDS from these firms remained low, with only (39.8%) of
MSMEs using their services. It is worth noting that, insufficient support and less accessibility of
public BDS may impair development of MSMEs because of their low ability to purchase services
from private service providers.
In conclusion, capability of BDS providers is not only explained by capability of resources
endowed because, in the study area the level of resources endowment differs from one BDSPs to
another and the same applies to service delivery pathways. It was evident that effective BDS
delivery depends on absorptive capacity of MSMEs to access and use delivered services. This
implies that capability of BDS resources alone is not sufficient to enable successful service
delivery, unless MSMEs are willing to access and utilize delivered services. Therefore,
consideration of MSMEs absorptive capacity has to be taken seriously before development and
delivery of BDS.
This study advocates for policy makers to consider establishing guidelines which will be used to
guide delivery of BDS.
The government should also provide subsidies for private service
providers who can invest and bring in appropriate technology to MSMEs. Subsidies should be
attractive enough to compensate for the costs that may be incurred. In addition, policies such as
minimum local content policies should be applied to motivate BDS providers to provide services
to MSMEs particularly micro and small enterprises.
This study has provided some empirical insights on the areas of focus and or future improvement
to the MSMES policy of 2012 particularly on the business development service delivery standards
and guidelines for service provision; such aspects are currently inadequately addressed.
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Thesis
Keywords
Medium enterprises, Arusha city, Moshi municipality, Business development, Small enterprises