‘SMEs’ participation in financial services subdued
Michael Tome Business Reporter
The Reserve Bank of Zimbabwe said subdued Small to Medium Enterprises participation in the financial services system is threatening financial inclusion following revelations that only four percent of the banking sector loans were advanced to small businesses.
The central bank is working flat out to incorporate small enterprises into the country’s financial services driven by a host of initiatives set to be implemented.
Speaking at the RBZ, World Bank joint Small to Medium Enterprises Finance and Development Conference, deputy governor Dr Jesimen Chipika confirmed that only four percent of the entire banking sector loans had been advanced to the small to medium enterprises sector.
“According to data maintained by the central bank, As at March 31, 2017, a total of 135,8 million was extended to small to medium enterprises sector contributing a mere four percent of the entire banking sector loans and advances.
“It is paradoxical that while SME’s are a key source of economic growth and employment in Zimbabwe their financial inclusion level remains very low,” said Dr Chipika
The deputy governor lamented the low levels of SME’s financial inclusion considering the important role they play in the country’s economic growth and employment creation.
She said only 14 percent of SME’s are banked, 18 percent served by formal financing institutions, 39 percent by informal financing service providers while 43 percent have no access to financial services.
Dr Chipika highlighted inadequate business management skills, and unacceptable collateral as some of the constraints affecting SME’s participation in financial services.
“Some SME financial inclusion barriers include, inadequate financial and business management skills, lack of acceptable collateral, poor access to markets ,obsolete equipment and technology, poor corporate governance structures and lack of critical economic size,” said Dr Chipika.
The conference which is running under the theme re-igniting SME Development in Zimbabwe learning from global experiences, aims to come up with practical initiatives that enable alignment of SME’s to the country’s financial services and grow sustainably.
Through the National Financial Inclusion Strategy, RBZ aims to increase overall level of access to formal financial services within the country to at least 90 percent by 2020 from 69 percent in 2014.
The central bank also seeks to increase the proportion of banked adults to at least 60 percent by 2020 from 30 percent in 2014.