The role of microfinance Institutions in SMEs development in Zimbabwe

Author

Girlie Ngandu

Title

The role of microfinance Institutions in SMEs development in Zimbabwe

Abstract

SMEs are an essential sector for both individual and national growth, however, financial constraints or limited access to finance can impede their development. For example, in a developing country such as Zimbabwe, many SMEs rely on their funds, family member's loans, bank loans and crowdfunding to launch and grow in their business. In other words, formal funding sources are not easily accessible to SMEs. Therefore, this study aimed to identify the difficulties SMEs face when accessing credit in microfinance institutions (MFIs), evaluate the strategies implemented to ensure access to credit for SMEs, and recommend alternative sources of funding for SMEs.
This study used a descriptive research design to collect primary data, targeted at 100 SMEs and randomly selected a sample of 50 participants using simple random sampling techniques to collect data. Subsequently, the data was aggregated through questionnaires, while the quantitative data was analysed using the Statistical Package of Social Sciences. The findings of the study revealed that loans can be beneficial for SMEs in terms of fundraising, asset accumulation, job creation, and quality of life, all of which are conducive to SME growth and development. As a result, the research outcomes suggest that microfinance institutions have a key role to play in supporting SME growth in Zimbabwe.
On the other hand, the study revealed that high interest rates, the lack of collateral, time taken to grant service and the lack of reliable source of repayment were some of the factors that impede the availability of credit to SMEs owners. In order to ensure that credit is accessible to SMEs owners, the study suggest that prices such as interest rates should be reduced, group loans should be prioritised. Microfinance institutions (MFIs) should provide training and support to SMEs, and, where feasible MFIs should be subsidised by the government in order to assist SME owners in obtaining affordable loans. Additionally, this study suggests that other financial sources such as personal savings, venture capital, crowdfunding, government assistance and support from friends and family.

Date

June 2023

Publisher

BUSE

Keywords

Microfinance

Institutions

Development

Supervisor

N/A