FINANCIAL institutions should adopt a cluster-based approach for financing small to medium enterprises, Reserve Bank of Zimbabwe governor Dr John Mangudya said.
The model entails the identification and grouping of the SMEs in a locality involved in similar business activities such as horticulture or dairy into a single cluster. Capacity building and credit programs are then tailored to the specific needs of the cluster.
The central bank governor said developing countries, such as Bangladesh, have successfully used the cluster model in the development of the SMEs and informal businesses.
Zimbabwe’s economy has over the past decade witnessed a structural shift with the small to medium enterprises emerging as viable entities while big firms continue struggling.
Dr Mangudya said the Small and Medium Enterprises Development Corporation would need to identify clusters that could be nurtured throughout all the districts of the country.
“This is critical in ensuring that the diverse funding needs of the SMEs are attended to in our collective endeavour to reshape the future economy of Zimbabwe in the path towards sustainable growth,” said Dr Mangudya. “The SMEDCO will be required to link the identified clusters with financial institutions for their funding and advisory requirements.”
Dr Mangudya said SMEDCO, banking institutions and microfinance institutions would be required to arrange training on entrepreneurship development where the Reserve Bank of Zimbabwe would play a supporting role. The institutions will also be required to incorporate the implementation status of such programs in their annual reports.
He also said the banks and microfinance institutions should explore the group lending approach particularly in the rural areas where the sense of belonging to the community is an important factor to the performance of a borrowing member in a group.
Such a model has been instrumental in rural development in some developing countries.
Dr Mangudya said the central bank would continue to champion financial inclusion as a key step towards achieving women economic empowerment.
“Women are currently largely excluded from formal financial services,” he said.
“The Finscope survey of 2012 indicated that 57 percent of the business owners are women, and women constitute the 51 percent of the Zimbabwean population. The participation of the Zimbabwean women in the mainstream economy is critical in attaining sustainable economic growth and poverty reduction. It is against this background that the bank is embarking on strategies to enhance women access to financial services.”
To facilitate enhanced participation of women in the development of the economy, priority would be given to potential women entrepreneurs in respect of SME credit disbursement.
Dr Mangudya said the central bank would work on the establishment of a revolving women empowerment fund, which would be availed at affordable interest rates to support their projects.