An Assessment of SMEs’ Financing by Commercial Banks in Zimbabwe

摘要

Abstract: Small-to-medium enterprises (SMEs) play a key role in the world economy and contribute significantly to an economy’s output, income and employment. Objective: This paper seeks to assess, based on existing evidence and theory, the extent to which commercial banks in Zimbabwe have been financing SMEs, and to provide policy recommendations on how to enhance the role of the key stakeholders in financing SMEs in Zimbabwe. Approach: Document analysis and an extensive review of the literature was undertaken to contextualize the study and draw some insights from both the theoretical and empirical literature that provided a framework of analysis for the study. The literature shows that SMEs are of great socio-economic importance in developing countries. However, in these emerging markets, access to financial services for SMEs remains severely constrained. Studies reveal that the level of external financing of SMEs in Zimbabwe is low, and that this is due to a number of shortcomings of the SMEs, lending institutions, the central bank and the government. Results: Zimbabwe’s economic challenges since 2000 through to dollarization in 2009, the informalization of the SME sector, customers’ financial illiteracy and lack of training, lack of collateral security for loans, a high non-performing loans ratio resulting in banks developing risk-averse behaviour, the lack of understanding of SMEs’ needs by banks, the inaccessibility of banks and the general lack of financial innovation are some of the major reasons for the low level of SME financing. Value: The low level of SME financing negates efforts for economic development and job creation, the supply of liquidity and trade facilitation. Implications: A set of policy suggestions for SMEs, lending institutions, the central bank and government to ensure the viability and growth of the SME sector are outlined.