SMEs bank critical

Ms Grace Mutumbwa-Head Harare Province in Ministry of SMEs

ZIMBABWE badly requires a Small and Medium Enterprises (SMEs) bank as it is critical in availing funds to the small businesses which have the potential to transform the economy, a top SMEs ministry official has said.

Addressing delegates during an SMEs business exchange program organised by HELP Germany in Norton recently, Head for Harare Province in the SMEs ministry, Grace Mutumbwa, said a specific bank would be the answer to funding challenges rocking SMEs.

“It’s important that we give much precedence to an SME bank because that alone will help ease borrowing for the small businesses,” said Mutumbwa.

“Imagine we currently have about three million SMEs in the country and if we say let’s contribute a dollar each per month (towards establishing the bank), we would have collected US$3 million for a start.

“Yes SEDCO are giving loans but they operate like any other bank because the money is not theirs. But with our own bank we have control and flexibility because the money will be ours. We can determine our own loan durations and interest rates,” she said.

Since adoption of multiple currencies in February 2009, which resulted in the crippling liquidity crisis bedevilling the economy, banks have been availing short-term loans of between 90 and 120 day.

Interest rates have also been extremely high at between 15 and 30 percent.

Industry has slammed the interest rate regime and loan tenure saying they cripple operations which have a long turnaround period such as mining and agriculture.

Bankers Association of Zimbabwe president George Guvamatanga has in the past argued that banks cannot be flexible in giving loans because the Reserve Bank of Zimbabwe was unable to effectively play its lender-of-last-resort role.

Guvamatanga said it was unfair for people to urge banks to avail loans to everyone without first urging people to deposit money.

He argued that banks do not have money of their own but are only holding depositors’ money, which is money-on-call, which can be demanded at any time.

Meanwhile, Mutumbwa has urged SMEs involved in manufacturing to perfect their products by utilising various machines donated by the government of India under the Zim-Indo partnership.

The Indian government donated turning machines, lathe machines and die making machines to the Harare Institute of Technology and Chitungwiza Vocational Centre, among other training institutions around the country.

SMEs have literary taken over as the biggest employers in the country due to company closures since the turn of the millennium due to a number of factors including acute foreign currency shortages.

However, despite its centrality to economic development, SMEs have been severely stung by cash shortages.

Stringent collateral requirements and general paperwork have seen SMEs failing to access funds