Zimbabwe: SMEs Welcome Lending Facilities

Small to medium enterprises have welcomed plans by the Reserve Bank of Zimbabwe to avail long term lending facilities at reasonable interest rates to the sector.

In its last meeting, held on the 30th of April, the RBZ's Monetary Policy Committee approved a $500 million facility for purposes of enhancing production and productivity for Micro, Small and Medium Enterprises (MSMEs).

The MSMEs will access the facility from banks and micro-finance institutions at 30 percent per annum.

This is lower than the punitive rates that MSMEs are normally subjected to due to a number of reasons, including lack of eligible collateral.

Speaking during the Zimbabwe Finance Online Conference, organised by Business Weekly and the Financial Markets Indaba, RBZ's Deputy Director, Economic Research and Policy Division, Dr Nebson Mupunga pointed to the fact that SMEs accounts for less than 4 percent of total loans.

He said there is need for additional bank financing required to support SMEs and the RBZ is already working on putting in place some intervention measures including the $500 million facility.

"This was out of the realisation that loans to SMEs account for a smaller proportion of total loans around 4 percent."

Speaking during the same Conference SME Association of Zimbabwe Founder & Executive Officer, Farai Mutambanengwe highlighted that access to capital or loans was one of the biggest challenges SMEs are faced with.

He said most banks insists on title deeds and as much as the problem was identified a long time ago, proffered solutions were not being implemented.

One of the solutions was to come up with a collateral registry and according to Mutambanengwe this was done in 2015 but up to now, six years down the line, the registry is not yet in place.

"We are told that it will be there by December but we have been told the same thing over the course of the six years that I am talking about."

He said there is need for that collateral registry to enable SMEs to borrow.

However, the announced facility is expected to improve access to reasonably priced facilities. SMEs are also in need for foreign currency for tooling purposes and the central bank has since established an SMEs foreign currency auction and in addition, is now selling foreign currency to Bureaux De Change for on-selling to SMEs and individuals that require smaller amounts. Commenting on the overall economy Mutambanengwe acknowledged the fundamental changes taking place in the economy with regards inflation and the exchange rate, but said the economy was still "healing" and not yet there in terms of having all the important "factors" in place.

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