Banks tighten conditions for SMEs
LIVINGSTONE MARUFU
Local banks want the small to medium enterprises (SMEs) to submit financial statements to access loans as they seek to drive the formalisation of the sector.
The demand by banks comes as statistics show that few SMEs have bank accounts.
According to the latest FinScope survey, only 14% of SMEs are banked, meaning few could access loans from the banks.
ZB SMEs manager, Enrietta Tigere, who spoke at the Zimbabwe Agricultural Show SMEs workshop last week urged the sector to formalise their operations to get funding from banks.
“We now need our SMEs to bring financial statements for us to see how they are performing. This will also help us determine the amount we can disburse to them according to that evaluation,” Tigere said.
She added: “We have made it a requirement that they should bring these documents to see the company’s performance and financial position.”
Official statistics suggest that the sector employed an estimated 5.7m people with the majority being women and contributed more than 50% to the country’s GDP.
According to FinScope, SMEs play a key role in the economic development of countries across the globe through employment creation and contributing towards poverty alleviation.
However, one of the recurring barriers to growth and development of the sector is limited access to funding in the banking sector.
According to a recent Reserve Bank of Zimbabwe (RBZ) report, Zimbabwe National Financial Inclusion Journey, the number of SMEs with bank accounts more than doubled to 145 237 from 71 730, between December 2016 and September 2020.
The RBZ came up with a number of initiatives promoting innovative financial products for SMEs.
It is estimated that the increase in the number of bank accounts might have been triggered by the liquidity crisis that started in 2017 forcing the unbanked population to open bank accounts to circumvent the cash crisis as the economy was operating using electronic money.
Microfinance institutions (MFIs) largely drove the growth in nominal value of credit to the sector.
This partly explains the decline in lending to the sector as SMEs shun the high interest rates charged by MFIs.
Access to foreign currency is also critical for SMEs as some heavily rely on imported raw materials and consumables for their operations.
SMEs continue to face a number of challenges when accessing funds from lending institutions. Most of them lack collateral, which is a pre-lending requirement by many financial institutions.
This forces SMEs to either have to self-finance or find informal means of financing their businesses or be subjected to extremely high interest rates by banks and MFIs.
