RUTENDO RORI
The lack of the required collateral security is hindering small to medium enterprises (SME’s) access to US$500m loan facility availed by the Reserve Bank of Zimbabwe (RBZ) to help them recover from the adverse effects of Covid-19 pandemic, Business Times can report.
Exacerbating the situation, according to the SME Association of Zimbabwe chief executive officer, Farai Mutambanengwe, is also the lack of a detailed database of SMEs players.
“We understand people are accessing the $500m loan from RBZ.
“The challenge remains that it still requires collateral security in the form of title deeds, which most small businesses do not have,” Mutambanengwe said.
He said access to finance has always been a major obstacle to SMEs growth in most countries and the challenges to SME’s access to finance are mainly caused by documentation requirements and perceived cumbersome lending processes.
“Most banks insist on title deeds and although the problem was identified a long time ago, solutions are not being implemented,” Mutambanengwe said.
“One of the solutions was to come up with a collateral registry to enable SMEs to access capital.”
Most SMEs are perceived to have a higher probability of default than larger firms.
Most of them are run haphazardly without due regard to the basic tenets of professionalism including bookkeeping, resulting in some failing to access capital.
The lack of detailed database of SMEs players across the country means that lenders are not sure of how many, where and how these players operate.
The tenure of the RBZ facility is 12 months for working capital and 36 months for capital expenditure.
The central bank has warned that beneficiaries should not be tempted to access multiple loans through different lending institutions.
Lenders have been advised to make use of the Credit Registry System and declarations by potential beneficiaries to guard against multiple access and default.
Lending institutions will access funding from the Reserve Bank at an interest rate of 30% per annum and will charge an all-inclusive maximum margin not exceeding 10%.
