Bulk of SME’s remain unbanked

Understanding Life Insurance

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Understanding Life Insurance

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore.

  • Amet Sollicitudin Quam Dolor Mollis
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  • Vehicula Vulputate

ABOUT 43 percent of micro, small and medium enterprises in Zimbabwe, which generated US$7,4 billion in revenue last year, have no access to financial services, a recent study shows.

The MSMEs provide a source of livelihood for close to six million Zimbabweans, but face a myriad of challenges in their quest for viability, chief among them access to funding.

A study commissioned by Government and undertaken by FinScope shows that 1,6 million of the 2,8 million MSMEs are financially excluded, which affects the viability of the businesses. Nonetheless, 2,9 million people subsist as workers in MSMEs.

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“Limited (financial) resources and information preclude the possibility of spreading policy initiatives to include the entire Micro Small and Medium Enterprise sector,” the FinScope study noted.

The study was carried out in Zimbabwe on MSMEs largely to find out their needs and constraints to growth. The FinScope has been carried out in Zambia, South Africa, Malawi and Tanzania.

According to the study two million of the MSMEs are individual enterprises while 800 000 are actually business owners with employees.

Barriers to financial inclusion were cited as small income, little business revenue, fear of debt, lack of affordability and ignorance.

 

The FinScope report recommended the need to support development of financial products that are affordable, appropriate and accessible to enhance usage of financial services. About 57 percent of star-up MSMEs cited access to funding as a major constraint, 52 said funding constrained operations/management while 43 percent said lack of funds affected their growth.

The study found out that of the 57 percent of MSMEs that are financially included only 18 percent are actually formally served and 14 percent are banked (driven by cash transactions and savings).

Of the enterprises that are formally served only 7 percent are serviced by other financial institutions such as insurance firms while 50 percent of the MSMEs are largely driven by informal savings.

The FinScope study shows that 2 percent of the enterprises are covered by a mixture of informal financial services and proper banking facilities. About 1,4 percent have access to banks, other formal and informal financial services while 2,3 percent have access to other former and informal financial services.

The report says 39,4 percent have access to only informal services, 1,1 percent to other formal and 3,8 percent access banking services.

It was established that 64 percent of MSMEs in urban areas are financially included, compared with 53 percent in rural areas, and the rates are higher in the main urban centres — Bulawayo and Harare both with 68 percent inclusion compared with rural provinces such as Matabeleland North with 41 percent inclusion.

About 92 percent of medium-sized businesses are financially included, compared with 82 percent small, 69 percent micro businesses and 51 percent individuals while the rate stands at 71 percent for registered/licensed businesses and 54 percent for those unregistered.

At least 58 percent women are financially included compared with 56 percent of men who operate the MSMEs.

Start-ups and MSMEs cited lack of business premises, identifying prospective clients, equipment/raw material prices as constraints while those already in operation cited lack of funding, equipment, few customers, being owed money and competition.

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