In an economic environment of contracting smallholder farmers for the commercial production of a given crop, the ability of small and medium-size enterprises (SMEs) to create and sustain contract farming operations is essential. The performance of private firms, and of SMEs in particular, depends on the availability of critical support services such as rural roads, electricity and information services, management support and financial facilities, all of which are best provided by the government. One straightforward policy implication is that the government and other stakeholders need to explore better options that will provide adequate financial resources to private SME investors. Commercial banks in Tanzania are risk-averse, and the cost of capital, especially for SMEs, is very high. The age of local SMEs indicates that there is an almost continuous inflow of new entrants into the sub-sector and that the barriers to entry are relatively low.