Bribes, Taxes and Regulations: Business Constraints for Microenterprises in Tanzania

Should the focus on microfinance constraints shift to institutional issues?
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As more and more microfinance institutions (MFIs) have rapidly started operations, the microfinance sector has focused mainly on constraints to proper growth due to the lack of commercial capital.This paper focuses on the constraints and negative effects on a microenterprise current operations. As per the paper:

  • While many issues, including the true feasibility of poverty reduction through microfinance, have been discussed, not enough attention has been paid to corruption within the sector and how overcoming that could help improve this emerging industry across the developing world.

It surveyed 160 firms throughout Tanzania in regards to the following challenges/constraints:

  • Economic variables,
  • Property rights,
  • Finance,
  • Corruption,
  • Infrastructure,
  • Institutions,
  • Regulations,
  • Taxation,
  • Others.

The focus of this paper, however, is on corruption and how that leads to increased taxes on the organization and an unfavorable regulatory environment.

  • Many of the surveyed firms fall into the trade sector, and therefore the paper compares corruption between the microfinance sector and the trade sector.
  • The study found that the sector which has the biggest problem with the public sector, is the one that has higher levels of corruption.

About this Publication

By Fjeldstad, O., Kolstad, I. , Nygaard, K.