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Funding, Biggest Challenge for SMEs

Local Small to Media Enterprises in Zimbabwe are battling against funding challenges compounded by failure to access credit lines from financial institutions, a problem they say has derailed their operations.

Addressing various stakeholders at the CBZ International SME Indaba 2018, CBZ Divisional Director Molly Dingani said SMEs are facing funding challenges and financial exclusion which hinders their businesses from expanding.

“SMEs face limited access to finance, high perceived risks in SME loans, access to competitive rates may also be very limited and high cost borrowing from formal sectors,

“Most banks do not have departments which are adequately resourced to deal with financial needs of SMEs, lack of Business Management skills, lack of collateral and access to markets,” said Dingani.

She added that banks need a thorough understanding of the nature and dynamics of the informal sector in terms of product/ service offering, nature of business constraints faced by the sector as funding requirements to enable them to develop relevant products and services.

However CBZ recognized the importance of the MSME sector as an area of the growth with needs and requirements which are sector specific.

“This led to the establishment of a Business Banking Division which is dedicated to service the Micro and SME sector, this is done through the provision of customized product offerings and capacity building to new and existing MSMEs,

“The strategy is to grow this portfolio in a manner that will see the Bank increase its market share and thereby contribute to the growth of the economy,” she added.

Speaking at the same event RBZ Deputy Director, Philip Madamombe said the structure of the economy has changed over the years and Zimbabwean economy is now largely driven by SMEs.

“As the country sets itself on the path of economic growth and recovery, SMEs have potential to drive sustainable growth. Therefore adequate support mechanisms to high entrepreneurial SMEs need to be put in place,

“Financially included, SMEs are empowered to tackle challenges such as poverty, hunger, inequality, health, education, wealth  & employment creation. Notwithstanding the significant economic contribution of SMEs in Zimbabwe, the sector lacks access to financial services,

“As at 31 December 2017, loans to the SMEs sector amounted to $146.22 million constituting a mere 3.85% of total banking sector loans of $3.80 billion and lending to women and the youth who also constitute a significant portion of SMEs has also remained low,

“30% are served by informal financial service providers, only 14% of SMEs are banked, 43% do not have access to financial services and only 18% are served by formal financial institutions,” said Madamombe.

In recognition of the importance of MSMEs and other marginalized groups in inclusive economic growth and development, the Reserve Bank of Zimbabwe is implementing various measures that promote access to financial services and is spearheading the development of the country’s National Financial Inclusion Strategy (2016-2020).

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