Categories: Stories

Reserve Bank of Zimbabwe to urge banks to boost loans to SMEs

The Reserve Bank of Zimbabwe (RBZ) says bank loans to small medium enterprises (SMEs) slipped to $154 million in the first two months of 2016 from $171 million during the same prior period last year.

The central bank, however, said it had come up with new measures to push banking institutions to increase support to the sector, which has become Zimbabwe’s “new economy” in the wake of closures of mainstream companies.

As the formal economy shrinks in an increasingly hostile operating environment, the informal sector continues to gain ground. The informal sector now contributes more than 60 percent to the country’s gross domestic product, according to a Finscope survey in 2012.

The survey also revealed that only 14 percent of SMEs were banked. The $154 million represents a minor 4.1 percent of total banking loans.

While loans to the sector were gradually declining, SME deposits were however on the rise having jumped to $303 million from $279 million during the same period.

RBZ deputy governor Charity Dhliwayo said central bank now required all banks to set up SME divisions that have specific annual lending targets for the sector.

“We are also urging them to develop collateral substitutes in order to promote access to credit by SMEs,” Dhliwayo told the parliamentary portfolio committee on SMES.

Banking institutions, she said, shied away from financing SMES as most were not registered, lacked collateral and did not have proper accounting and governance systems in place.

Dhliwayo said banks had also been directed to open “no frills” savings accounts which have no administrative charges to encourage banking by small businesses.

“Unlocking SME financing requires a paradigm shift in formal banking. There is need for a mindset change when lending to SMEs as opposed to large corporates which they are used to lending to,” she said.

Dhliwayo said the RBZs was implementing a five-year financial inclusion strategy aimed at ensuring that the majority of Zimbabweans, including SMEs, were banked.-The Source

 

Related stories:

If the majority are poor the nation is poor, it does not matter how many billionaires you have

Minister embarrassed Zimbabwe is importing pins, needles, toilet paper and tooth picks

Why should the informal sector remain informal?

Mugabe’s 10-point plan to revive Zimbabwe

Formalising Zimbabwe’s informal economy- full statement and debate

 

 

(144 VIEWS)

This post was last modified on May 21, 2016 3:00 pm

Charles Rukuni

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

Recent Posts

Reserve Bank of Zimbabwe expects more foreign currency sellers to join the interbank market

The gazetting into law of the payment of quarterly taxes on a 50-50 basis in…

December 4, 2024

Zimbabwe 2025 citizens’ budget

Zimbabwe has today unveiled a ZiG276.4 billion budget for 2025 during which it expects the…

November 28, 2024

To go or not to go- Mnangagwa in a quandary

Zimbabwe President Emmerson Mnangagwa has repeatedly stated that he is not going to contest a…

November 25, 2024

ZiG loses steam, falls against US dollar for five consecutive days

The Zimbabwe Gold fell against the United States dollar for five consecutive days from Monday…

November 22, 2024

Indian think tank says Starlink is a wolf in sheep’s clothing

An Indian think tank has described Starlink, a satellite internet service provider which recently entered…

November 18, 2024

ZiG firms against US dollar for 10 days running but people still do not have confidence in the currency

Zimbabwe’s new currency, the Zimbabwe Gold (ZiG), firmed against the United States dollars for 10…

November 16, 2024