The Role of financial institutions to the growth of Small to Medium Entities in Zimbabwe

Author

Maadza, Martha

Title

The Role of financial institutions to the growth of Small to Medium Entities in Zimbabwe

Abstract

The study focused on understanding the impact which financial institutions have on the growth of SMEs in Zimbabwe. The study was motivated by understanding especially how the borrowed finance, in the form of loans, helps the SMEs grow in Zimbabwe. The objectives of the study were to investigate how loans affect the performance of SMEs in Zimbabwe, to explore the difficulties for SMEs to access loans from financial institutions, to explore the challenges faced by financial institutions in advancing loans, and investigating the policy issues which are either increasing or reducing the access of loans for SMEs. The study used a survey of Bindura SMEs. The study used a sample of 8 financial institutions and 101 SME operators. The study used a questionnaire as a research instrument. The major findings were that there is a negative relationship at the moment between access to loans and performance of the SMEs. This implies that the loans being accessed are not being utilized properly towards growth. A hypothesis testing was done and the study found that the financial performance of SMEs is influenced by loans. Should loans be available there are higher chances of improving the financial performance of the SMEs. The difficulties being faced by SMEs in accessing loans are mainly driven by monetary policy issues (interest rates and access of money), lack of knowledge among SME owners, and the risk associated with SMEs in credit finance. The researcher recommended that the government should be actively involved in trying to provide surety for SMEs and crafting policies that allow SMEs to access loans easier. The study recommended that the SMEs should embark on training and development of their owners and staff to ensure that they have adequate knowledge on the issues regarding accessing and utilizing loans. The researcher also recommended that financial institutions should devise more relaxed requirements for the SMEs in granting them loans and develop innovative solutions towards reducing risk among the SME-loans.

Date

June 2023

Publisher

BUSE

Keywords

SMEs

Financial institutions

Supervisor

N/A

Item sets

Department of Accountancy

Media

The role of financial institutions to the growth of Small to Medium Entities in Zimbabwe.

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