Demand-Side Firm-Specific Determinants of Access to Financial Services among Local Civil Contractors in Selected Regions of Tanzania

Abstract

This study investigated the demand-side, firm-specific determinants influencing access to financial services among local civil contractors (LCCs) in selected regions of Tanzania. Primary data were collected from 354 LCCs using a mixed-methods approach and analysed through multiple linear regression. The study examined the influence of firm size, collateral availability, interest rates, documentation procedures, and firm age on financial accessibility. The results revealed that collateral availability (β = 0.385, p = 0.000), interest rates (β = –0.217, p = 0.000), bureaucratic documentation procedures (β = –0.115, p = 0.000), and firm size (β = 0.162, p = 0.001) significantly affect access to finance. In contrast, firm age (β = 0.048, p = 0.141) does not significantly influence credit access. Qualitative findings further support the view that high interest rates and complex documentation remain key obstacles for LCCs. The study concludes that internal firm characteristics substantially influence financial accessibility, with size and collateral acting as enablers, while interest rates and bureaucracy hinder access. Based on these findings, the study recommends that policymakers and financial institutions promote business development and formalisation of LCCs, adopt flexible collateral frameworks (such as movable assets and guarantee schemes), lower interest burdens, and streamline loan procedures through digitisation and simplification. These targeted reforms can enhance financial inclusion, thereby strengthening the capacity and sustainability of LCCs in Tanzania. The study adds to the limited literature on LCC financing in sub-Saharan Africa, offering demand-side insights to inform policy and institutional action.