Enhanced Capital Raising Options for the SME Sector

The small business sector in Zimbabwe, as in other developing countries has potential to be a conduit and a catalyst for sustainable development.

However, despite such potential, the small business sector attracts limited funding attention from retail, institutional and multilateral investors.
In an effort to bridge the funding gap of SMEs, the country’s first Alternative Trading Platform (ATP), Financial Securities Exchange (FINSEC), launched the Growth Enterprises Market (GEM) Portal. The GEM Portal is a dedicated online Portal designed for Small and Medium Enterprises (SMEs) in need of raising capital for retooling , increasing productivity, or to increase their product range or for expansion into diversified markets.

It is a simplified yet innovative use of technology for SMEs to apply for equity or debt financing, and be exposed to financiers and advisors. SMEs can apply through the GEM Portal to raise capital in an efficient, convenient and cost-effective manner that ensures sustainability of the enterprises. The GEM Portal seeks to assist SMEs to access affordable funding, or “patient capital” that is different from the short term funding that is usually expensive.

The platform is designed to make it easy and cost effective for all the participants in the listing and/or funding value chain as it promotes financial inclusion as well as deepen the capital and financial markets by enabling easier access to the capital markets by a broader range of issuers and investors.

Prospective SMEs complete an online application for raising capital through either equity listing on the FINSEC Exchange or through debt financing by investors. The interactive online form has an in-built comprehensive scoring and rating mechanism of each input by the applicant, indicating to the applicant how well they are doing and the prospects of their application. Applications that meet the predefined minimum score will be exposed to various providers of capital.
Investors who enlist on the GEM Portal will have access to a directory of investment grade SMEs that have undergone pre-assessment on the GEM Portal. They will be able to choose SMEs to invest in based on their internal investment criterion thereby saving time from considering several applications the majority of which may not meet the requirements for listing. Having the investee company pre-assessed through the GEM Portal allows the investors to focus on applicants within a defined category. The investee company, by having shares listed and trading on an exchange, will benefit from an efficient and transparent price discovery of the shares and valuation of the business while investors who buy shares in the listed SMEs have an mechanism of exiting the market whenever conditions are good for them by simply selling the shares in an open market.

Through ease of access using technology and the internet, the GEM Portal will extend its reach to a growing number of enterprises across all sectors of the economy in all the provinces of the country. SMEs also benefit through improved corporate governance structures as determined by the on-going obligations expected of every listed company.

The GEM Portal is indeed a panacea to capital raising by SMEs who have faced numerous challenges in accessing cost effective capital for the sustainable growth of the industry.

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