‘Improve financial literacy’

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ZIMBABWE should tailor training programmes focusing on financial literacy as well as introduce a host of reforms to the financial services sector in order to grow the informal sector, a World Bank official said.

Hazel Ndebele

World Bank country manager Nginya Mungai Lenneiye told a stakeholder consultative workshop this week on the FinScope Micro, Small and Medium Enterprises (MSME) survey developed by FinMark Trust most micro enterprise owners in agriculture were located in rural areas.

“Improving financial literacy should be looked at because without tradable lease or equivalent document sustainable financing in agriculture will be difficult,” said Lenneiye.

The ministry of Small to Medium Enterprises (SMEs) Development director in charge of research and policy development Tabani Shoko said it was imperative to create an enabling environment for the small scale businesses to mature into more sophisticated formalised enterprises.

“We are engaging relevant stakeholders on recommendations to focus on growth and sustainability of MSMEs which is a key economic driver at the moment,” said Shoko.

The survey revealed that 86% of MSME owners are financially excluded. Financial exclusion refers to lack of access to even the most basic financial products and services, incurring significant costs as a result.

Some of the reasons in the report why MSME owners are not banked pointed to lack of accessibility and proximity. A total 5% indicated lack of financial literacy or knowledge about banks and their products.

The survey launched early this year also shows that 85% of MSME owners do not borrow from any financial institutions due to fear of failing to pay back. An estimated 24% of the country’s US$10,81 billion Gross Domestic Product (GDP) remains largely unbanked.

The majority of Zimbabweans are forced into SMEs and the informal sector due to many company closures and retrenchment. Around 95% of SMEs make up most of the informal sector with a total of 5,7 million people working in the sector including the MSME owners.

According to the survey, turnover of the sector in 2012 was estimated to be at least US$7,4 billion

In an effort to receive deposits from the informal sector, ZB bank last week unveiled an interest-free informal traders loan facility which is expected to attract US$5 million worth of deposits from the small and medium enterprises by mid-2014.

Stakeholders also recommended that the government, through the ministry of SMEs and Co-operative Development, revise labour laws to encourage the informal sector to employ skilled labour. The workshop also said the SMEs sector should be prioritised and allocated prime trading space to improve on visibility and marketing in general.

“Although operational space is a challenge itself, there is also another challenge with the actual cost that is often associated with acquiring the space hence there is need for intervention from different stakeholders on how to tackle the operational space issue with regard to availability and affordability,”

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