Nearly Half of Tanzanian Businesses Say Access to Finance Is Their Biggest Obstacle

Access to finance is the single most frequently reported obstacle facing registered Tanzanian businesses, with 48 percent of establishments identifying financing as their biggest constraint, far ahead of tax rates, electricity, licensing or corruption, according to the country’s 2025 Comprehensive Enterprise Survey. The Comprehensive Enterprise Survey Report 2025, produced by the National Bureau of Statistics, found that businesses remain heavily dependent on internally generated funds to operate. Retained earnings and internal funds accounted for 88 percent of operating capital among small establishments, 83.9 percent among medium sized firms and 80.2 percent among large establishments, showing that even bigger companies finance most day to day activity from their own cash flows rather than through external credit. The same report found that access to finance was cited as the main business obstacle by 48 percent of establishments, compared with 13.6 percent for tax rates and 10.7 percent for electricity. Other concerns such as corruption, business licensing, crime and customs restrictions were reported much less frequently. That finding matters because it shifts the business environment debate away from the assumption that regulation or taxation are always the dominant constraints on enterprise growth. For many Tanzanian firms, the more immediate limitation is financial capacity. Businesses can identify new markets, win orders or find opportunities to expand, but without working capital, equipment finance or affordable credit, they can only grow at the pace allowed by their existing profits. The result is a private sector that is commercially active but financially constrained, particularly at the smaller end of the market where formal banking relationships remain much weaker. Small Firms Depend Most Heavily on Their Own Cash The difference between small and large establishments is especially clear in how businesses finance operations. Small firms sourced 88 percent of operating capital from retained earnings or internal funds, while only 5.6 percent came from private or state owned banks. Among medium firms, banks accounted for 8.6 percent of operating capital, rising to 11.8 percent among large establishments. Supplier credit and customer advances played only a small role, accounting for 3.3 percent of operating capital among small establishments, 4.4 percent among medium firms and 4.6 percent among large companies, while non bank financial institutions contributed even less. The implication is that most firms are not operating within deep credit relationships capable of supporting aggressive expansion. A business that relies primarily on retained earnings must first generate profit before it can buy more inventory, machinery, vehicles or technology. That can preserve financial discipline, but it also slows capital formation. The constraint is especially severe for small firms because their retained earnings are usually smaller in absolute terms while borrowing options are narrower. The survey found that only 41 percent of small establishments had a current or savings account, compared with 80.5 percent of large establishments. This suggests that the financing problem begins before credit itself. A significant share of smaller businesses remain only weakly connected to formal banking, limiting the financial records and transaction histories that could later support credit assessment. Tanzania’s Registered Firms Generate TZS 172 Trillion in Turnover The financing constraint sits inside a sizeable enterprise economy. Businesses covered by the survey generated annual turnover of approximately TZS 172.03 trillion, with manufacturing leading at TZS 47.2 trillion, followed by transport and storage at TZS 35.87 trillion, wholesale and retail trade at TZS 33.49 trillion and construction at TZS 28.46 trillion. Large establishments accounted for TZS 92.51 trillion of total turnover, compared with TZS 54.33 trillion for medium-sized firms and TZS 25.19 trillion for small establishments. The concentration of turnover among larger firms shows why access to capital matters for enterprise progression. Small companies dominate by number, but larger establishments account for a much bigger share of sales because they have greater capacity to invest, employ workers, carry inventory and enter larger contracts. The issue for Tanzania is therefore not only creating more small businesses. It is helping viable small and medium firms become larger. Finance is central to that transition because growth usually requires spending before revenue arrives. A manufacturer may need machinery before production can increase. A logistics company may need additional vehicles before servicing a contract. A retailer may need larger inventories before entering a new market. A technology company may need to hire developers months before a new product generates income. Where firms must fund those investments almost entirely from retained earnings, growth becomes slower and more dependent on existing profitability. The Export Gap Widens Sharply With Firm Size The survey also shows that larger Tanzanian companies are much more integrated into export markets. Among small establishments, domestic sales accounted for 98.9 percent of revenue, while direct exports represented only 0.3 percent and indirect exports 0.8 percent. Medium firms generated 3.3 percent of sales from direct exports, while large establishments generated 11.7 percent directly from foreign markets and another 6.6 percent indirectly. That progression is important because exporting usually requires more working capital than selling domestically. Businesses may need to finance production, certification, shipping, customs compliance and longer payment cycles before revenue is collected. The report found that Kenya was the most frequently reported export destination, while China and India dominated import sourcing. The larger export share among bigger firms therefore reflects more than market ambition. It also reflects financial capacity. A business with access to working capital can absorb the delay between producing goods and receiving foreign payment, while a cash-constrained company may be unable to accept an export order even where demand exists. This is one reason why stronger trade finance, invoice discounting, export credit and supply chain finance could have an effect beyond the banking sector itself. Power Outages Add Another Cost to Capital Finance is the largest reported obstacle, but infrastructure remains a substantial business cost. The Comprehensive Enterprise Survey found that 71.8 percent of establishments experienced power outages during 2025, and among affected businesses, 42.6 percent reported outages lasting five hours or more. The ability to protect operations against those outages varies sharply by business size. Generator ownership increased from 24.2 percent among small establishments to 80.6 percent among large firms. This creates another financing disadvantage for smaller businesses because infrastructure unreliability can itself require capital. Larger firms can buy generators, solar systems, batteries or backup equipment, while smaller firms may have to stop production entirely. The same shock therefore produces different economic outcomes depending on balance sheet strength. For a manufacturer, restaurant, cold storage business or digital service provider, a five-hour outage can mean lost production, spoilt stock, delayed orders or lost customers. Businesses with backup systems absorb the interruption; those without them absorb the revenue loss. Access to finance therefore affects resilience as well as expansion. Innovation Remains Limited The survey found that only 9.6 percent of establishments introduced new or improved products or services between 2022 and 2024. Among those that did innovate, 54.7 percent said the products or services were new to their main market. The low innovation rate is relevant to the financing story because research, product development and technology investment usually require capital before returns are known. A firm relying overwhelmingly on retained earnings is more likely to prioritise activities with immediate cash flow over experimental investments whose returns may take years to materialise. This can produce a self-reinforcing cycle. Firms remain small because they invest little, they invest little because they lack finance, and their limited scale then makes banks more reluctant to lend. Breaking that cycle requires financial products capable of assessing business potential rather than only existing asset ownership. Access to Finance Is Also an Information Problem The banking relationship data indicate that part of the financing constraint may reflect information asymmetry between firms and lenders. Banks prefer businesses with reliable accounts, transaction records, audited statements and collateral because these reduce uncertainty about repayment capacity. Small firms often lack these features, which increases perceived risk and raises borrowing costs. This is why the relatively low share of small firms with current or savings accounts matters. Financial inclusion for enterprises is not simply about opening an account; regular use creates transaction histories that can help lenders assess revenue patterns and cash flow. Digital payments, electronic invoicing, tax records and supplier data can therefore become credit infrastructure if lenders are able to use them responsibly. Tanzania’s financing challenge may consequently require stronger credit information systems and cash flow-based lending alongside more conventional collateral-backed loans. Tax Rates Matter, but Much Less Than Finance The survey’s ranking of business obstacles also provides useful context for the policy debate. Tax rates were the second most frequently reported obstacle, but at 13.6 percent the share was less than one third of the proportion identifying access to finance. Electricity followed at 10.7 percent, while corruption was cited by 4.9 percent, business licensing and permits by 3.3 percent and crime, theft and disorder by 2.9 percent. This does not mean taxation or regulation are irrelevant. Businesses experience multiple constraints simultaneously, and the survey asks respondents to identify the main obstacle rather than every difficulty they face. The results nevertheless show where firms place the greatest weight. The most common answer is capital. That should influence how private sector development policy is prioritised. Tax reforms and licensing simplification may improve the operating environment, but they will not resolve a financing gap that prevents firms from investing even when commercial opportunities are available. The Banking System Has a Larger Role to Play in Enterprise Growth The survey points to a substantial gap between Tanzania’s enterprise base and its financial system. Registered firms generate more than TZS 172 trillion in annual turnover, but bank financing accounts for only a small fraction of operating capital, particularly among smaller businesses. That creates an opportunity for commercial banks, development finance institutions, microfinance providers and fintech companies. Working capital facilities, asset finance, leasing, receivables finance, purchase order finance and sector specific lending could allow businesses to expand without waiting years to accumulate retained earnings. The opportunity is particularly significant in manufacturing, transport, trade and construction because these sectors account for most enterprise turnover and often require substantial upfront investment. Financial institutions will still need to manage credit risk carefully, but the survey suggests the current equilibrium may be too conservative if almost half of firms identify finance as their primary constraint. Firm Growth Matters More Than Firm Creation Alone Tanzania’s enterprise policy has often focused on entrepreneurship and business creation, but the Comprehensive Enterprise Survey highlights the importance of what happens after a company has been established. The country already has tens of thousands of registered establishments across manufacturing, trade, transport, construction and services. The survey covered 36,228 establishments, including 28,383 small, 6,335 medium and 1,510 large firms. The imbalance between those categories shows how difficult it remains for firms to move from one stage to the next. A healthy business environment should not only create more small companies. It should allow successful small firms to become medium sized, and medium sized firms to become large. That progression matters because larger firms export more, generate more turnover, invest more and generally have stronger access to formal finance. The financing constraint identified by 48 percent of businesses therefore has implications for the structure of Tanzania’s economy itself. If firms cannot obtain capital, many may remain permanently small even when their markets could support further growth. Tanzania’s Business Constraint Is Increasingly a Balance Sheet Constraint The 2025 Comprehensive Enterprise Survey provides a broad view of taxation, infrastructure, labour, trade, innovation, technology and government interaction, but its clearest message is financial. Businesses are generating large volumes of sales and operating across increasingly diverse sectors, yet most still rely overwhelmingly on their own earnings to finance operations. Small firms are especially exposed. They have weaker banking relationships, less access to backup infrastructure, lower export participation and fewer financial resources to invest in technology or innovation. This matters for Tanzania’s wider industrialisation and private sector ambitions because economic growth depends not only on how many businesses exist, but on whether productive firms can accumulate capital fast enough to expand. Access to finance is therefore not simply a banking issue. It influences manufacturing capacity, exports, job creation, infrastructure resilience and innovation. Nearly half of Tanzanian businesses have now identified it as their biggest obstacle. The policy challenge is turning the country’s growing financial system into a deeper source of productive capital for the firms expected to drive the next stage of economic growth.