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Vice President Phelekezela Mphoko

Prosper Ndlovu Business Editor
VICE PRESIDENT Phelekezela Mphoko says a quick remodelling of the financial services sector is needed to suit funding requirements of the growing micro, small and medium enterprises (MSMEs).

The demise of the manufacturing industry in the last decade and consequent job losses have given birth to MSMEs, which today employ close to five million people, statistics indicate.

The sector, however, lacks critical funding due to the general exclusion by the financial markets, the VP said.

In a speech read on his behalf by Sithembiso Nyoni, the Minister of Small to Medium Enterprises and Co-operative Development during the MSMEs financial expo in Bulawayo yesterday, the Vice President said improved access to financial services by marginalised communities was the panacea to poverty eradication.

“The contribution that small to medium sized enterprises make to the Zimbabwean economy is a clear illustration of the potential benefits that these enterprises can provide to the overall development of the country,” he said.

“It’s important that they be provided with the necessary tools to ensure they grow into large entities that can further provide employment, contribute to poverty alleviation and address economic inequalities in our society. Customise your credit policies and procedures to suit MSME and co-operative funding needs.”

VP Mphoko said despite the positive milestones recorded in the sector so far, MSMEs continue to face difficulties in accessing necessary funding, technology, business knowhow, support and linkages required for them to fully succeed.

“The overall result is absence of a well functioning SME lending market, and MSMEs are impeded in their growth with negative consequences for innovation, economic growth and macro-economic resilience,” he said.

“Banks are not adequately providing MSMEs with capital as their funds are too expensive and they consider SMEs business risky.”

The Vice President said the bridging of financial system gaps such as high administrative costs, collateral requirements, lack of managerial capacity and poor record keeping, would give the required impetus for unlocking SMEs growth.

He also called for tightening of supply side factors such as transaction costs due to smaller amounts required by MSMEs and condemned failure by banks to understand the nature and operations of small businesses.

Other constraints plaguing the sector include infrastructure deficit, bureaucracy, multiple levies and weak intellectual property protection.

“This status can’t be allowed to continue. It’s our resolve to do all that’s necessary to capacitate our MSME sector into one that’s robust and vibrant,” said VP Mphoko.

He urged financial institutions to partner small businesses, consider group lending and favourable guarantee schemes to broaden economic activity.

MSMEs should also build trust and good relationships with banks, avail bankable proposals to make their businesses attractive for investment, said the VP.

“Our focus should remain the development of a complete and strong MSME sector because it’s a powerful empowerment tool that provides communities and individuals with opportunities for self empowerment,” he said.

In 2012, Zimbabwe had 2,8 million MSME owners earning $3,5 million per month and employing 2,9 million people.