eBusiness Weekly
Hilda Muchamiri
Small and Medium Enterprises (SMEs) have been mushrooming in the country since the turn of the millennium, but mainly since 2008 at the height of hyperinflation due to company closures.
In 2008, inflation peaked at 231 million percent at the end of June and got worse towards the end of the year, making it difficult for companies to plan.
At the same time, consumers had been hit where it mattered the most — the pocket — as their money endured the wrath of hyperinflation.
This saw many firms closing shop, with some of the proprietors and affected employees setting up their own businesses so as to grind an honest living.
But some of the businesses have either closed or are gasping for life as they contend with a myriad of challenges, dramatised by shortages of funding.
This is despite the fact that SMEs employee about 75 percent of the country’s economically active population.
Financiers claim that it is difficult for them to fund SMEs given the way the businesses are managed.
Several accusations, thought to be impeding their growth, have been made, including a glaring lack of professionalism in business management, use of unqualified labour force such as the immediate family members to cut costs, and failure to maintain proper books of accounts, among others.
Banks are known to valorise books of accounts as they better inform them on the firm’s cash flows, which are crucial in warranting loan extensions so that they grow the business.
Further, SMEs are thought to be weighed down by their use of operating addresses that are similar to their residential ones.
Crucially, SMEs are understood to shun banks, opting to keep their money at home.
However, storing money from daily takings under the pillow is thought to be detrimental since the players will have challenges accessing loans from banks given that they will be unknown.
Banks have adopted the Know-Your-Customer (KYC) approach to banking in sync with the dictates of the Reserve Bank of Zimbabwe.
Experts say banks tend to lend to customers whose cash flows they are familiar with, not least because banked funds are kept better compared to stashing money at home.
Unknown to SMEs is that banks are crucial as they provide funding which is useful particularly when one has an order to supply.
The absence of books of accounts and more importantly, collateral which most banks require, cripples the operations of SMEs.
Adequate funding also ensures that SMEs are able to make and supply quality products.
Other SMEs are also operating without insurance for their ventures, making them vulnerable in cases of disasters such as the recent fire outbreak at the Glenview Area 8 SMEs Complex.
SMEs involved in furniture making at Glenview Area 8 lost equipment and products worth thousands of dollars and the bulk of them couldn’t salvage anything since they didn’t have insurance.
