Published: 12 May 2014

The small to medium enterprises (SMEs) sector wants the Government to facilitate establishment of micro finance banks (MFBs) to enable it raise funds for its operations.

SMEs Association of Zimbabwe founder Farai Mutambanengwe said local banks were not extending much support to the sector while failure by the Government to capitalise the Small Enterprises Development Corporation (Sedco) was worsening the situation.

"Traditional banks have proved unmotivated to set up SME-specific products, and their SMEs banking divisions are always subservient to their corporate divisions," he said.

"This results in SMEs issues always being buried at the bottom of the tray."

Dubbed the engine for economic growth, most economic activity in Zimbabwe is taking place in the SMEs and informal sectors as the formal sector shrinks on the back of unrelenting liquidity constraints. At least $7 billion is estimated to be circulating in the sector, more than double the amount in the formal economy. Mutambanengwe said Sedco, which the Government set up to finance SMEs as well as provide them with training, was failing to discharge its duties due to lack of funding.

He said absence of financial support from traditional banks had resulted in the sector turning to micro finance institutions where funding was available at very high interest rates, making the sector unviable. Mutambanengwe accused banks of promoting external competition through funding importers rather than the local productive sectors.

This issue of lack of funding can only be addressed by the formation of micro finance banks," he said. The Reserve Bank of Zimbabwe has expressed its readiness to license MFBs with the minimum capital requirement for establishing a microfinance bank set at $5 million.

- New Ziana

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