Maravi

(HERALD) SMEs to benefit from US$100m revival facility

SMEs to benefit from US$100m revival facility
Business Reporter

THE Small and Medium Scale Enterprises are set to benefit from the US$100 million Zimbabwe Economic and Trade Revival Facility. Interfin Banking Corporation, as the local administrative agent acting on behalf of the Government, will be recommending projects eligible for funding.

The multi million dollar facility was launched on Monday and will provide onward lending to the productive sectors. Finance Minister Tendai Biti said the SMEs would be given priority.

"We are going to make sure that a certain percentage of the facility will be reserved for Small and Medium Scale Enterprises," said Minister Biti.

The funds under ZETREF would be disbursed in two batches with the initial draw down of US$70 million.

Government injected US$20 million from its International Monetary Fund’s Special Drawing Rights account while Afreximbank contributed US$50 million.

Since the introduction of the use of multiple currencies in the economy last year, most SMEs are struggling to survive due to lack of long-term finance. The current liquidity constraints has also seen most banks failing to provide long-term loans.

As a result of the country’s deteriorating credit worthiness over the previous years, it has been difficult for Zimbabwe to attract substantial amounts of inflows in the form of lines of credit.

However, there was a notable increase in inflows after the formation of the inclusive Government early last year as disbursements totalled US$656 million. In the six months to June this year, the country attracted lines of credit worth US$200 million.

With the SME sector now accounting for about 90 percent of Zimbabwe’s employable population, analysts say there is need for Government and private sector collaboration to secure more funding for SMEs.

The absence of a secondary stock exchange for SMEs to help raise working capital and allow participation of other investors has also made expansion of such firms difficult.

Plans to establish a secondary stock market for SMEs have been on cards for the past five years but the stock market authorities and the Government failed to agree on the size of business that should be classified as an SME.

The world over, the growth of small businesses has been openly encouraged as these are widely seen as engines of economic growth.

For example, the London Stock Exchange operates a subsidiary equities market — the Alternative Investment Market, which is specifically targeted at helping small companies raise capital.

South Africa and India also boast of vibrant SME sectors. The Indian SME sector has grown over the last 60 years to become one of the most powerful sub-economic sectors. There are millions of participants in India’s SME sector.

Labels: SMEs, TENDAI BITI

posted by MrK @ 5:21 AM