CHAPTER 1
INTRODUCTION

1. The Tanzania Development Vision foresees that by the year 2025, “Tanzania should have created a strong, diversified, resilient and competitive economy, which can effectively cope with the challenges of development and, which can also easily and confidently adapt to the changing market and technological conditions in the regional and global economy”. The challenge is therefore to mobilise human and other resources towards that goal.

2. Economic Reform Programmes implemented by the Tanzanian Government have been based on the philosophy that Tanzania is committed to a market economy whereby the private sector will take the lead in creating incomes, employment and growth. On the other hand, the State will be a producer of public goods, play a regulatory role to level the playing field and create conducive environment for the private sector to take the lead in driving economic growth. This philosophy is evident in almost all policy statements made since 1986 and in particular after 1996. The private sector has started playing an ever- increasing role in creating incomes and employment. Small and Medium Enterprises (SMEs) account for a large share of the enterprises active in Tanzania. In fact Small and Medium Enterprises are the emerging private sector and do form the base for private sector-led growth.

3. SMEs, important as they are to the economy, have been facing a number of problems despite the on-going reform programmes. This is due to a number of factors, one of which is a persistent culture that has not recognised the value of entrepreneurial initiative in improving the lives of the people. Other factors include complex, bureaucratic and costly legal, regulatory and administrative environment where SMEs are at a greater disadvantage than their counterparts that are larger in size. The high cost of compliance to