An Assessment of SMEs’ Financing by Commercial Banks in Zimbabwe

Stanley Sachikonye () and Mabutho Sibanda ()
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Stanley Sachikonye: Midlands State Univesity
Mabutho Sibanda: University of KwaZulu-Natal

Acta Universitatis Danubius. OEconomica, 2016, issue 12(6), 213-224

Abstract: Small-to-medium enterprises (SMEs) play a key role in the world economy and contribute significantly to an economy’s output, income and employment. This paper seeks to assess the extent to which Zimbabwe’s commercial banks finance SMEs. Document analysis and an extensive review of the literature was undertaken to contextualize and draw a framework of analysis for the study. The literature shows that SMEs are of great socio-economic importance in developing countries but access to financial services for SMEs in Zimbabwe remains low. Zimbabwe’s economic challenges since 2000 to dollarization in 2009, the informalization of the SME sector, customers’ financial illiteracy and lack of training, lack of collateral security for loans, a high non-performing loans ratio, the lack of understanding of SMEs’ needs by banks, the inaccessibility of banks and the general lack of financial innovation are some of the major reasons for the low level of SME financing. A harmonised approach to policy suggestions for SMEs, lending institutions, the central bank and government to ensure the viability and growth of the SME sector are required and outlined. The research helps to formalize the SME sector considering its attendant benefits to the relevant players in the economy.

Keywords: SME financing; dollarization; economic development; commercial banks (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:dug:actaec:y:2016:i:6:p:213-224

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