Big firms making forays into the informal sector

LIVINGSTONE MARUFU

Large corporations are making forays into the informal sector in an effort  to make their services more accessible  to small and medium scale businesses, it has been learnt.

The informal sector, according to executives, will drive future economic growth.

Apparently, estimates suggest that SMEs contribute over 65% of gross domestic product (GDP) while employing about 70% of the country’s workforce.

CBZ Holdings CEO, Blessing Mudavanhu, told Business Times:

“We are already on a path to come up with innovative digital tie platforms. Those people whom you see in the informal sector are probably unbanked but they have phones.We are coming up with products which the informal sector will do for mobile  banking.

“We will digitise our offerings where we will bring the informal sector into the formal system.We are also offering credit solutions where they could get credits using the phones.”

FBC CEO, John Mushayavanhu,  weighed in saying: “FBC Holdings is going to follow where the money is. There is some serious money out there in the informal sector so we need to capitalise on that and make sure that the money is returned to the formal sector so that we can carry out more projects for the local people.”

Mushayavanhu said the bank will also use various platforms such as FBC’s SMEs Banking Mobile Moola, a mobile payment platform; Eagle Insurance’s Hospital Cash Plan scheme; and micro-finance services through Microplan to interface with the informal sector.

Even insurance firms also want to tap tap into the informal sector.

First Mutual Holdings Limited CEO,Douglas Hoto, also told Business Times that the company will partner the informal sector in its ventures without changing  how the business is conducted.

“In Zimbabwe there are a lot of people that are financially excluded  and the way we must include them must be consistent with the way they are doing their business. Currently, we are interacting with them to understand the way they are doing business so that the products we offer must talk to the way they do business.

One of the things that Zimbabweans remember a lot is the loss of value of their savings over the years. I believe going forward, we can go into the market talking about converting pensions into steers and heifers where we can get value out of that,” Hoto said.

The  National Social Security Authority (NSSA) is at the advanced stage of introducing  the Informal Sector Scheme (ISS) — a social security coverage extension to cater for the informal sector which comprises 65% of the working population.

NSSA’s social security division currently administers two schemes which are the Pensions and Other Benefits Scheme (POBS) as well as the Accident Prevention and Workers Compensation Scheme (APWCS).

NSSA acting general manager Charles Shava last week said : “Whilst efforts are being made to formalise the informal sector, it remains a key contributor to economic activities. Similarly, the government has recognised the importance of coverage extension and has mandated NSSA to undertake the development of a unique scheme, ideal for the informal sector,” Shava said.

He said the International Labour Organisation (ILO) recommendation 204 recognises that the high incidence of the informal economy impacts on the rights of workers and provision of decent working conditions, as such globally many countries were working on the extension of social security coverage to the informal sector.

“We have undertaken a coverage extension feasibility study in partnership with ILO as well as a risk assessment with the internal risk unit. We have also conducted research and benchmarking engagements with regional countries on approaches for coverage extension,”Shava said.

Government and private investors are increasingly focusing on SMEs as high growth zones.