Agri-SME managers' perception of financial management practices in Tanzania

Abstract

Agribusiness Small and Medium Enterprises (Agri-SMEs) handle 60 % of all food production and trade worldwide. Despite their crucial contribution to developing economies, there is a widespread concern about their poor performance, largely due to poor Financial Management Practices (FMPs). This study used a survey of 427 Agri-SMEs in Tanzania to investigate managers’ perception towards FMPs and whether the implementation of FMPs impact the achievement of Agri-SME business objectives. Descriptive statistics were employed to characterize managers’ technological and financial backgrounds. Structural Equation Modeling (SEM) was employed to assess perceived ease of use of FMPs and perceived usefulness of FMPs. The findings revealed that managers' perceptions of financial management practices significantly and positively influence the organizational performance of Agri-SMEs. Specifically, the perceived usefulness and ease of use of financial practices were key drivers of improved performance. Additionally, about 62 % of Agri-SMEs have not adopted Enterprise Resource Planning (ERP) systems. Furthermore, 63 % of Agri-SME managers report limited exposure to financial management training. These findings imply that there is need for enhanced financial management technology adoption and managers’ frequency retooling on financial management practices.