(SUNDAY MAIL ZW) Gvt calls for financial inclusion of SMEs
Sunday, 21 July 2013 00:00
Stories by Prince Mushawevato

A lack of affordable funding has remained a major challenge for small and medium-scale enterprises (SMEs) as financial institutions’ confidence in the sector remains low, a Government official has said.

Speaking during the Zimbabwe SME Banking and Micro Finance Summit, the Minister of Small and Medium Enterprises and Co-operative Development, Sithembiso Nyoni, said SMEs were failing to expand operations due to high interest rates and stringent lending conditions.

The sector has proved to be the country’s economic pillar as most big companies continue to struggle.

“There is need for banks to avail more loans and support for small and medium-scale enterprises, as the country is increasingly becoming reliant on these businesses,” she said, adding that Government research has shown that the sector is performing relatively better than the formal sector.

“Compared to day-to-day office workers, SMEs are performing way better in terms of revenue generation and employment creation.
“And this is why we say development of the sector is a key condition in promoting equitable economic development,” said Mrs Nyoni.

She also noted that success of small and medium businesses was not only premised on the availability of funds, but also on the genuine involvement of various stakeholders that had direct and indirect influence to the sector’s operations.

In his presentation at the summit, United Nations Development Programmes (UNDP) Zimbabwe economic advisor Mr Udo Etukudo said it was important for developing countries to promote financial inclusion.

“Banks need to find a more progressive way to support smaller players. SMEs play a big role in developing economies; they provide some services that big industries cannot. The banks are the fuel and without them, there is no development for the sector.

“Creative changes take place and we need to be adoptive to them. Small and medium firms need access to finance to improve their productivity and subsequently export rates.

“At the same time, big companies and SMEs need to co-operate, not view each other as competitors,” explained Mr Etukudo.

Market watchers contend that SMEs need to formalise their operations through registering with Government so as to get recognition from financial institutions.

The sector’s major source of funding includes Government, through the Small Enterprises Development Corporation (Sedco), family and friends.
Countries such as China, India and Iran have also supported.

Last year, the Chinese government made available a US$30 million facility through the Infrastructure Development Bank of Zimbabwe (IDBZ).

It is estimated that close to US$2 billion generated by SMEs is circulating outside the formal banking channels.

It is believed that SMEs are the largest employer after Government, and will be critical in generating a $100 billion economy by 2040.
A Government-commissioned scientific Small and Medium Enterprises Survey 2012 report, compiled with the assistance of the World Bank, revealed that the informal sector has created nearly six million jobs in the country and contributes US$7,4 billion to the economy.