The Human Capital Theory. The theory was introduced by Schultz (1961) and was developed further by Becker (1975). The theory posits that education and training is critical for human development and its impact should be assessed in terms of return on investment. The concept of return-on-investment as introduced by Schultz (1961) highlights the cost-benefit analysis of training and education since expenditure on training and education is costly should be considered an investment. Becker (1975) developed the theory by introducing the concept of general-purpose human capital and firm-specific human capital that is widely used by human resource development globally. According to the theory education or training raises the productivity of workers by imparting useful knowledge and skills, hence raising workers future income by increasing their life time earnings (Becker, 1975). A firm requires human capital with the capabilities for identifying and analyzing business development needs and opportunities, these calls for talented human resources with relevant knowledge, competence and other personal attributes. These skill set are usually gained through education, training and experience (O’Sullivan & Sheffrin, 2007). In this perspective, the theory explains the contribution of non-financial business support services in creating and imparting business education and training to MSMEs owners, workers and operators. This is important since it helps to create awareness among MSMEs and their managers on the need to learn and establish how non-financial business support services facilitate the learning and firm’s growth processes.

Contingency Theory. The theory was developed by Fielder (1964) and it explains that situational factors influence decision making and the effectiveness of a leader. According to this theory, “an individual can be an effective leader in one circumstance and an ineffective leader in another one” (Fielder, 1964, pp. 158-159). To be a successful and productive manager or leader, the theory posits that you should be self-aware, objective and adaptable by examining each situation and selecting the effective leadership style. This might be a challenge to some of the MSMEs managers or owners, therefore, the acquisition of non-financial business support services can make MSME owners understand and manage their working environment, market dynamics and business situational circumstances. This may explain the different growth potentials and performance among MSMEs.

The Marketing Mix Theory. Marketing management is one of the key components for any business success. Core to marketing management is the issue of marketing mix which represents a combination of marketing tools and techniques such as product, price, place and promotion (4Ps). According to Mbura and Merezia (2015) the marketing mix “is not a theory of management that has been derived from scientific analysis, but a conceptual framework which highlights the principal decisions that a marketing manager makes in configuring out their offerings to suit customers’ needs” (Mbura & Merezia, 2015, p. 7). This involves decisions such as improving product quality, branding and pricing, informing and attracting new customers and distributing products to final users. These activities may require non-financial business support services to MSMEs in terms of how to apply and manage the marketing mix variables such as product branding and marketing strategies.

Expectancy Theory. Expectancy theory was initially developed by Vroom (1964). The theory argues that a person decides to behave in a certain way based on the expected results in a given situation. According to the theory individuals make choices based on their estimates as to how better the situation will become after a certain decision. The theory is of relevance to the non-financial business service providers in terms of designing the training programs that fit with the requirements of MSMEs. This is because the demand of the non-financial business services will be influenced by the expected benefits after receiving the service. As a result, Mbura and Merezia (2015) argue that it is the duty of service providers to create awareness and persuasion to SMEs on the availability of the services and the benefits to be realized after acquiring the service.

There is mixed evidence in the literature regarding the impact of BDS on business performance. For example, Ombi et al. (2018) assessed the effect of business development services on small medium enterprises (SMEs) performance in Malaysia. The findings show that while financial support had an effect on SMEs performance non-financial support had no effect on SMEs performance in Sabah, Malaysia. Okeyo et al. (2014) examined the effect of BDS on the performance of SMEs in the manufacturing sector in Kenya; the findings show that BDS did not facilitate market access for SMEs in manufacturing sector but it rather improved procurement services and facilitated access to infrastructure facilities amongst SMEs in the manufacturing sector. Moreover, Krüger (2011) found a negative relationship between market access and SMEs performance in South Africa. On the other hand, Abdullahi et al. (2015) found that BDS in form of education and training in areas of business management, entrepreneurship, financial management and business plan preparation enhanced SMEs owners’ management skills and competencies which led to improved business performance. A study by Mengstie (2016) shows that BDS in form of market access and input supply affected positively the performance of micro and small enterprises in east Amhara of Ethiopia. However, infrastructure facility, training and technical assistance recorded insignificant effect on performance SMEs.

MSMEs sector has continued to play an important role in the economic transformation in Tanzania via creation of employment opportunities, source of creativity and innovation and its contribution to GDP. According to the National Baseline Survey Report for Micro, Small, and Medium Enterprises in Tanzania, MSMEs contributed about 27 percent to Tanzania’s GDP in 2010 (Ministry of Trade and Industry, 2012; Diao et al., 2018). Diao et al. (2018) further estimated the contribution of MSMEs showing that the value-added of all MSMEs accounted for 32.4 percent of national private non-agricultural GDP in 2010. The MSMEs contribution to manufacturing value-added was around 25 percent concentrating in beverages, food processing, textile, wood processing, furniture, and building materials. Moreover, using Tanzania’s Annual Survey of Industrial Production (ASIP) for 2008 and 2009 which are the two available rounds of ASIP, Diao et al. (2018) show that the total value added of the six manufacturing subsectors that was contributed by small firms in the informal sector was higher than that of their counterpart formal firms.

A cross sectional questionnaire was administered. A sample of 380 MSMEs was randomly selected but only 250 MSMEs returned the questionnaire. The MSMEs were drawn from sectors of Agriculture (50), Manufacturing (100) and Services (100). Convenience sampling technique was used in order to find representatives of Business Advisors. A total of 10 Consultant and Business Advisors and 5 Government Agencies were approached and administered with questionnaires. We distributed questionnaires and collected information from the MSMEs owners and managers so as to get tips of the demand side of the non-financial business support services. This was important to understand the extent of service utilization, challenges and what needs to be done by service providers in order to improve the services. On the other hand, business advisors and Government departments were important on the supply side of the non-financial business support services. They provided information on the types of non-financial support services provided and the extent of their utilization, challenges faced by MSMEs when acquiring the services and the supportive policy environment in place. However, in assessing the nexus between the utilization of non-financial support services and MSMEs development, we used data collected from MSMEs in empirical analysis and the data that was collected from business advisors and Government departments enriched the empirical findings through descriptive analysis.

In terms of the non-financial support services offered, the questionnaires were based on a five point likert scale as follows; 5 = Very often, 4 = Often, 3 = Average, 2 = Not often, 1 = Not at all. On the other hand, regarding the perceptions of MSMEs owners, business advisors (business consultants) and Government officials with regard to non-financial support services, the questionnaires were based on a five-point likert scale as follows: 5 = Highly beneficial, 4 = Beneficial, 3 = Neutral, 2 = Less beneficial, 1 = Not beneficial at all. In the same way, the questions concerning the challenges were based on a five-point likert scale as follows: 5 = Highly challenging, 4 = Challenging, 3 = Neutral, 2 = Less challenging, 1 = Not challenging at all. The descriptive analysis was used to examine the perceptions of MSMEs owners, business advisors (business consultants) and Government officials regarding provision of non-financial support services. Method of Analysis is the weighted average index (WAI) which was used to examine farmers’ perception of the economic benefits of excreta use in southern Ghana (Cofie et al., 2010).

The WAI formula followed:

Where:

The general demographic of the sampled population has been given in Table 2. The table shows that a large number of MSMEs business owners were below the age of 50 years. In terms of the education, the majority had secondary education (109 or 43.6%) and primary education (72 or 28.8%) respectively. This confirms the need for training to MSMEs owners.

The Majority of the MSMEs were in service (100 or 40%) and manufacturing sectors (100 or 40%), only (50 or 20%) were engaging in agricultural trade. This is in consistent with results of Diao et al. (2018) who reported recently the rise of employment opportunities in service and manufacturing sectors in Tanzania. Most of the MSMEs (214 or 85.6%) were operating under sole proprietorship. This is linked to the popularity of sole proprietorship and its simplicity in starting the business (Cronje et al., 2004). However, Woldie et al. (2008) warn that sole proprietorship is a risky form of business ownership. This in part justifies the need for non-financial business development services training to sole proprietors.

Regarding the demographic profile of business consultants and advisors and Government departments’ representatives, the majority had university education (8 or 80%) and college education (2 or 20%) respectively. This is an indication that most of the business advisors are in young age and have university knowledge which suggests that they are well informed of non-financial business support services. Most of the business advisors have served more than 50 MSMEs owners and all have appropriate and relevant knowledge of the non-financial business development services (10 or 100).

In assessing the awareness of non-financial business development services among MSMEs, it was found that 197 (78.8%) MSMEs owners were aware of the non-financial business development services while only 53 (21.2%) were not aware of non-financial support services. However, only 124 (49.6%) use the non-financial support services while 126 (50.4) do not use the services. In terms of the importance of the non-financial services, the majority 147 (58.8%) recognized the importance of acquiring and utilizing non-financial support services to help them grow and develop their businesses while 103 (41.2%) did not see the importance of non-financial support services in their businesses.

Table 3 presents the views of MSMEs owners, business advisors (business consultants) and Government officials with regard to non-financial support services provided. From the respondents, the Weighted Average Index (WAI) was considered very strong for the factors of consultancy and business advisory services (WAI=2.97), on the job training (WAI=2.58), marketing assistance (WAI=2.40) and technological development and transfer (WAI=2.27). This shows that consultancy and business advisory services, training and market assistance are among the regular non-financial support services provided to MSMEs in Dar es salaam region. In the same vein, building business linkages and mentoring recorded weak WAI.

On the other hand, business advisors indicated that consultancy and business advisory services (WAI=7.50), on the job training (3.90) and marketing assistance (WAI=3.80) were the most non-financial support services provided. These results are in line with the perceptions of MSMEs owners. In contrast, Government officials indicated that on the job training (WAI=4.40), consultancy and business advisory services (WAI=3.60) and technological development and transfer (WAI=3.30) were the most non-financial services provided to MSMEs in Dar es salaam region. This is linked to the availability of Government departments and institutions that support the development of MSMEs in Dar es salaam region such as Small Industries Development Organization (SIDO), Tanzania Trade Development Authority (TANTRADE) and few Government financial institutions which are aware of the need of business development services and have incorporated them in their core activities particularly by providing training, advisory services and helping in transfer of technology to MSMEs.

In examining the influence of non-financial support services on MSME development, we conducted a multiple regression analysis (Table 4). The regression equation was given as follows:

Where

Dependent variable was MSMEs development. This was captured by using variables such non-financial BDS increased profitability, improved product quality, increased market penetration, enhanced managerial efficiency, increased competitiveness and enhanced network with large firms. The respondents were asked to rate how their profitability, product quality, market penetration managerial efficiency, competitiveness and network with large firms changed after receiving non-financial support services in the past two years. The five-point likert scale was used to capture the responses.

Independent variables. Non-financial business development services was an independent variable which was captured by training, mentoring, consultancy and business advisory services, technological development and transfer, marketing assistance, business linkages and Government policy. The five-point likert scale was used to capture the responses.

Control variables. The study incorporates three control variables which are firm size, firm age, and firm sector. Control for firm size was important partly due to the reason that micro and small firms face many challenges which calls for more support compared to medium or large firms. Firm age was important to capture the years of business experience among MSMEs. The firm sector was used to identify the distribution of firms in various sectors of the economy. The firms were found to be distributed in three major sectors which are agriculture, service and manufacturing.

From the results it is evident that non-financial business support services recorded a moderate relationship with MSMEs development and the result of R² value suggests that 75% variation of MSMEs development could be explained by non-financial business support services.

In terms of the individual non-financial support services, consultancy and business advisory services had coefficients of estimate which was significant (β₆ = 0.589, p<0.0158). This means that there was up to 0.589 increases in MSME performance for each unit increase in consultancy and business advisory services to MSMEs. Several studies have indicated that MSMEs face a number of challenges including inadequate training, shortage of capital and an anti-entrepreneurial spirit in Tanzania (Mashenene & Rumanyika, 2014; Isaga, 2019). This suggests that provision of non-financial support in form of consultancy and business advisory services is expected to enhance MSME performance. Similarly, training (on the job training) had a significant relationship with MSMEs development (β₅ = 0.487, p<0.015). There was up to 0.487 increases in MSME performance for each unit increase in training to MSMEs. For example, studies of Anderson (2017) and Nyangarika (2016) have shown that limited resources and lack of managerial and operation skills, limited market information, inadequate access to appropriate technology and finance are among the barriers to MSMEs development in Tanzania. This implies that non-financial support services in form of on-job training would have a significant impact on MSME performance.

In the same vein, the findings indicated that marketing assistance had a significant relationship with MSMEs development (β₇ = 0.264, p<0.003). This means there was up to 0.264 increases in MSME performance for each unit increase in marketing assistance to MSMEs. Swai (2017) indicated that access to the formal markets and markets, poor technology and lack of certification are among the barriers facing MSMEs in Tanzania, and in view of this non-financial support in form of marketing assistance could enhance MSMEs performance. Moreover, technological development and transfer indicated a positive relationship with MSMEs development (β₈ = 0.127, p<0.027) suggesting that there was up to 0.127 increases in MSME performance for each unit increase in technological development and transfer to MSMEs. Inaccessibility to appropriate and relevant technology is among the challenges facing MSMEs in Dar es salaam region, currently, there are initiatives by both the public and private institutions to support MSMEs. For example, SIDO apart from providing training and advisory services have been assisting MSMEs access various equipment, machines, and incubation technologies at affordable prices. This has helped in some ways MSMEs to improve their products quality.

On the other hand, in contrast to expectations, building business linkages recorded a negative relationship with MSMEs Development (β₄ = -0.311, p<0.045). This means that there was up to 0.311 decrease in SME performance for each unit increase in building business linkages. The divergent relationship may be due to inadequate capacity stemming from the small size of MSMEs compared with their counterpart large firms and hence non-realization of expected results. Kweka and Sooi (2020) show that business linkages between SMEs and large firms are weak in Tanzania and they argue that establishing business linkages is influenced by firm’s level of production capacity, training, participation in exporting, and technology partnerships.

In the same way, mentoring had a negative relationship with MSMEs Development (β₉ = -0.041, p<0.024). This implies that there was up to 0.041 decrease in MSME performance for each unit increase in mentoring. The divergent relationship might be a result of the content of mentorship provided and the negative implications it had on MSMEs performance.

Lastly, Government policy had a significant relationship with MSMEs development (β₁₀ = 0.308, p<0.000). This means there was up to 0.308 increases in MSME performance for each unit in improved government policy to MSMEs. A number of studies have shown that unfriendly business environment as a result of poor tax policies, restrictive entrance procedures and cumbersome legal and regulatory frameworks hinder the growth and development of MSMEs (Mpunga, 2016; Juma & Said, 2016; Mkenda & Rand, 2020; Lwesya & Ismail, 2021). Thus, strengthening the business environment through appropriate and friendly business policies promotes the development of private sector.

In terms of how MSMEs perceive the benefits of non-financial support services (Table 5), a strong WAI was recorded for increased competitiveness (WAI=3.20), improved product quality (WAI=2.92), increased profitability (WAI=2.89) and enhanced managerial efficiency (WAI=2.66). This finding reveals that MSMEs owners are aware of the importance of non-financial support services and that it is critical in the overall development of their small businesses. However, MSMEs had weak perceptions that non-financial support services enhanced network with large firms. On the other hand, business advisors indicated strong WAI for increased competitiveness (WAI=4.40), improved product quality (4.20) and increased profitability (WAI=3.80). This generally shows that here is a positive correlation between non-financial support services and MSMEs improved performance.

In terms of the challenges to accessing appropriate non-financial support services (Table 6), failure of non-financial support services to fit with the needs of MSMEs (WAI=3.78), high cost of services (WAI=3.29), Shortage of qualified providers (WAI=2.87) and limited access to information (WAI=2.54) recorded strong WAI. This finding highlights that MSMEs have unique and specific needs for non-financial assistance that business consultants must consider when designing their non-financial support services if their services to MSMEs are to be productive and successful. IFC (2010) argues that smallness of MSMEs confers a disadvantage; this is because business owners or managers have to perform a wide range of duties compared to their large firms’ counterparts. This calls for diverse skills set that MSMEs managers or owners may not have particularly in developing countries.

High cost of services is another challenge in acquiring non-financial support services. In view of this, Ernst and Young (2009) posits that in expensive non-financial support services the majority of the SMEs do not seek to invest in them. Similarly, shortage of qualified business service providers seems to have affected the performance of MSMEs negatively. This in part can be explained by the reason that existing service providers tend to provide generalized solutions to identified problems (Owusu et al., 2017). It was also found that while non-financial support services are important to the development of MSMEs, limited access to information about their availability and usage is one of the reasons why they are not used. This may be related to the fact that some Government institutions and business consultants from the private sector do not provide regular information about them, which in turn reduces their use. On the other hand, though lack of monitoring and evaluation received the least weight (WAI=2.32), it is vital to receive feedback from MSMEs on the impact of non-financial support services provided. This is especially important to Government departments and institutions to nurture MSMEs in order to help them achieve growth and competitiveness through policy reviews and other regulatory measures.

In terms of ranking the non-financial support services that MSMEs would like to receive (Table 7), business management skills in areas of human resource and financial literacy (WAI=4.38), quality management (WAI=4.02), business creation and start up (WAI=3.69), and risk management (WAI=3.23) recorded strong WAI. Regarding business management skills, Keasey and Wastson (1993) show that small firms’ owners are constrained by inadequate skills and experience to make their businesses successful. Moreover, IFC (2010) argues that low levels of financial literacy cannot help SMEs sufficiently make a critical assessment of the different financing choices and decide on the appropriate modality for their businesses. Thus, improving financial knowledge and management training may have a positive impact on MSMEs development. On top of that, quality management is very important particularly in the modern competitive business environment, most of MSMEs indicated that maintaining quality is at the center to enable them survive, grow and remain in the market. For example, Nkwabi and Fallon (2020) indicated that support from the Government to enable SMEs use experts and acquire modern technologies to enable them produce quality products is critical in the food manufacturing firms in Dar es salaam region. Therefore, non-financial support services that address the quality management issues are preferred amongst MSMEs owners in Dar es salaam region.

Similarly, business creation and startup had strong WAI (3.69). According to the MSMEs baseline survey (2010), only 5% of MSMEs had Tax Identification Numbers (TIN) and only 4% were registered with Business Regulation and Licensing Agency (BRELA). This suggests that most of the MSMEs are still operating informally. Thus, non-financial business support service that address business creation and start up will help most MSMEs to graduate from informal to formal status. Moreover, risk management is another non-financial business support area that received relatively strong preference (WAI=3.23). According to Raghavan (2005) risk mitigation seeks loss reduction while maximizing profitability. Studies indicate that MSMEs are exposed to multiple risks such as failure of customers to pay their debt, fraud, theft, fire disaster, fluctuation in prices of raw material, interest rate risk, e-business and technological risks, among others. These risks if not mitigated on time ultimately lead to business failure. Non-financial support services in form of risk mitigation measures will help MSMEs take proactive measures to identify, analyze, and control risks. On the other hand, three factors had lower preference, these are technology development and transfer (WAI=2.98), network development in form of building linkages with large firms (2.73) and export assistance (WAI=2.13).