Exploring the Nexus: Investigating the Impact of Investment on SMEs Growth in Dar es Salaam, Tanzania

Abstract

Investments stand out as pivotal financial decisions crucial for the sustainable growth of enterprises. The investment activities of Small and Medium-sized Enterprises (SMEs) owners wield significant influence on both individual businesses and macroeconomic factors within the economy. This study look into characterizing the diverse types of investments embraced by SMEs and scrutinizes the impact of these investment practices on the growth trajectory of SMEs in Dar es Salaam city, Tanzania. To achieve this the cross-sectional design was used with study respondents being 384 SME owners whose effects of investment decisions were estimated by the use of ordinary least square model. The findings reveal that most business owners in Dar es Salaam allocate a portion of their financial resources to investments in assets, education-related activities, health-related initiatives, and religious matters. Notably, a substantial proportion of financial resources or profits is channeled into financial instruments such as shares, bonds, and real estate, with these categories reporting higher average investment values. To enhance SME growth in Dar es Salaam, policymakers should encourage diversification of investment portfolios, emphasizing awareness of various financial instruments. Implementing financial literacy programs is crucial for empowering SME owners to make informed investment decisions aligned with their business objectives. The establishment of a regulatory framework is recommended to ensure transparency and accountability in financial markets, especially for SMEs engaging in activities like buying and selling financial assets.