Assessing the impact of microfinance institutions on small and medium enterprises in Zimbabwe · Electronic Theses and Dissertations

Author

Berekwa, Leehasa

Title

Assessing the impact of microfinance institutions on small and medium enterprises in Zimbabwe

Abstract

This study was inspired by the current concern over the effects of MFIs on SMEs businesses in Zimbabwe. The study's main goal is to investigate how microfinance institutions affect SMEs in Zimbabwe. The purposive sampling strategy was determined to be the most effective for gathering data by the researcher using the nonprobability sampling method. The researcher determined that 138 SMEs would be an appropriate sample size for a thorough investigation by applying the sampling technique. The instrument used for gathering data is qualitative. Interviews and case studies were used to gather qualitative. The findings showed that when SMEs collapse, MFIs are unable to collect the remaining loan balances since the SMEs are not providing collateral. The study's conclusions also showed that SMEs may choose fully to ignore their responsibilities and default when they get loans without collateral security. Furthermore, moral hazards and unfavourable selection are brought about by information asymmetry in MFIs and information asymmetry makes MFIs and other financial institutions hesitant to lend to SMEs, according to study findings. The research additionally demonstrated that knowledge asymmetry may prevent big SMEs with strong growth prospects from obtaining financial support. The research highlights the scarcity of resources, company shutdowns, difficulty in obtaining resources, and inadequate funding-related barriers to acquiring adequate infrastructure. According to the research study, limited investment to small and medium-sized businesses and economic growth are inversely related. According to the survey, when SMEs default, MFIs are unable to recoup loan balances since the SMEs are not providing collateral. Furthermore, when SMEs took out loans without providing collateral, the research concluded that they were purposefully defaulting on the loans. The knowledge asymmetry between banks and SMEs was the root reason of China's funding difficulties for SMEs.

Date

June 2024

Publisher

BUSE

Keywords

Microfinance institutions

Small and medium enterprises

Supervisor

NIL