SMALL to Medium Enterprises (SMEs) in Zimbabwe remain financially excluded despite years of concerted efforts to grow the sector which is contributing immensely to the economy.
Financial exclusion refers to the barriers that hinder the effective use of a wide range of quality, affordable and accessible financial services, provided in a fair and transparent manner through formal and regulated entities.
The Financial Gazette's Companies & Markets can report that a number of informal traders are still shunning services offered by financial institutions in the country. Most of the SMEs are reluctant to even open bank accounts or access soft loans.
"We cannot use the financial services offered in our market because the institutions short change us. For instance, when accessing loans through SEDCO, we are not told in detail anything to do with interest rates. This will only come to light when we begin to repay," said Lucia Chinyamakobvu, an informal trader based in Harare.
SEDCO is the Small Enterprises Development Corporation, a government-owned institution falling under the Ministry of Small and Medium Enterprises.
"They are after making money. The claims that government is out to create conditions for us to grow is nothing short of rhetoric," Chinyamukobvu said.
Another entrepreneur based in Msasa industrial area, Josias Mushabvi, said she saw no need to get herself entangled with formal banking.
"It is pointless to align your business to the formalised financial systems because the benefits we derive are outweighed by the losses we incur. While we are expected to formalise, the financial institutions do not offer us much in return. Generally the loans we get rarely exceed US$4 000 since any amount more than that requires collateral security which most players in SME's do not have," he said.
A few financial institutions are offering services tailor-made for players in the SMEs sector. But it is a requirement to offer security in the form of title deeds and business registration certificates. The loans are repaid at an interest rate ranging between 13 and 18 percent per annum.
Micro financial institutions have often been the most common conduits for borrowing by informal sector players, even though their interest rates are "extortionate". While these also require collateral, this can be in the form of household goods such as refrigerators or even such items as motor vehicles.
The lack of a coordinated approach in bringing together the SMEs worsens the situation especially after considering that most programmes are skewed in favour of the urban population against their rural counterparts.
As noted in a 2014 Finscope Survey, financial inclusion is skewed in favour of the urban population at 89 percent against 11 percent for the rural population, despite 67 percent of Zimbabwe's population residing in rural areas.
It revealed that only 14 percent of SMEs owners are banked, using formal financial products and services offered by commercial banks.
The study revealed that the majority of business owners do not use or have bank accounts for business purposes, with 50 percent of them constituting 1,4 million people using informal mechanisms to manage their business finances.
Small to Medium Enterprises and Cooperative Development Minister, Sithembiso Nyoni, said government was working to make sure that players in the sector were financially included.
"We have spearheaded the formation of 400 credit and savings clubs in the country. Government has also spearheaded the amendment of borrowing laws to the effect that SMEs can now use movable property and even their livestock to access capital from financial institutions," she said.
However, Stanlock Nyakudya, Harare Territorial president of the Zimbabwe Chamber of Informal Economy Assciation, dismissed the minister's claims.
"Government is good at drafting documents and making well decorated statements but the reality is that there is nothing of that sort taking place on the ground.
"Most of the policies and research findings have not helped to boost viability because government does not have effective monitoring mechanisms of the programmes," he said.