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Minister Nyoni

Tinashe Makichi Business Reporter
Government is still in the process of finalising the $3 million loan from an Arab financial institution for the recapitalisation of the Small and Medium Enterprises Development Corporation(SMEDCO), a Cabinet Minister said yesterday.

SMEDCO is a leading development finance institution for the promotion and development of micro, small and medium enterprises in the country which was formed in 1983 through an Act of Parliament.

Since dollarisation, the institution has been grappling with funding challenges and has on several occasions failed to execute its mandate.

Small and Medium Enterprises Development Minister Sithembiso Nyoni yesterday told a Millennial Economic Forum that Government was in the process of securing funding from the Arab Bank for Economic Development (BADEA) for the recapitalisation of SMEDCO and it was still work in progress.

“We are still in negotiations with BADEA over a $3 million loan for SMEDCO and we see this as an important step towards the growth of the SME’s sector.

“I recently engaged the Finance and Economic Development Minister Patrick Chinamasa over the funding of SMEDCO and he was clear to me that there are challenges,” said Minister Nyoni.

She said there are procedures that are still being followed through.

SMEDCO last year disbursed loans to 200 micro and small enterprises and 60 members from four cooperatives at an interest rate of 15 percent per annum.

Minister Nyoni said the financial institution is facing challenges of information asymmetry as most micro, small and medium enterprises may not be able to provide adequate financial information to assist in making lending decisions.

“We are working so hard towards formalising small-to-medium enterprises and we believe that on indeginisation, small business should strive towards building sustainable entities that can attract foreign investment on their own.

“Small business players should desist from waiting for foreign players to set up businesses, they should set the pace themselves,” said Minister Nyoni.

She said other challenges faced by small business players is lack of security or collateral as some of the potential beneficiaries may not have adequate security to secure the loans.

Minister Nyoni said in some cases there was diversion of funds since there was no separation of personal and business funds by some entrepreneurs.

Such challenges among other factors led to high non-performing loans and delinquency.

SMEDCO’s mandate covers the micro, small and medium enterprises as well as cooperatives. These cut across all sectors of the economy.

Minister Nyoni said SMEDCO intends to mobilise additional lines of credit to ensure that the major challenge of access to finance by SMEs was addressed.

“Access to finance will be coupled with business training to improve the beneficiaries of the corporation loans’ financial literacy among business other skills.

“I urge small business players to build their business foundations on transparency and as a ministry we will play our part in financial inclusion by ensuring that SMEDCO’s beneficiary clients use financial services,” said Minister Nyoni.