Aman Mdewa Nthangu, Pumela Msweli
Abstract
This study investigates how firm characteristics specifically size, sector, and regional location shape the primary obstacles faced by Small and Medium Enterprises (SMEs) in Tanzania. Using data from the 2023 World Bank Enterprise Survey of 600 SMEs across five regions ( Dar es Salaam, Mbeya, Arusha, Dodoma , and Zanzibar) and multiple sectors, the analysis applies an ordered probit regression model to examine the relationship between these firm-level and contextual variables and 13 key business constraints, including access to finance, electricity, corruption, workforce skills, and regulatory burdens. The findings reveal systematic differences: medium-sized firms face fewer challenges with finance, crime, and informality than micro and small firms; retail and service firms experience heightened obstacles related to corruption, taxation, and licensing; and regional disparities indicate that SMEs in Zanzibar and Mbeya report fewer constraints than those in Dar es Salaam or Arusha. By combining Institutional Theory and the Resource-Based View, the study demonstrates how external institutional weaknesses interact with internal firm capacities to shape business outcomes. The results highlight the need for targeted policies that account for firm size, sectoral exposure, and regional governance differences.