The Impact of bank lending on the growth of SMEs in Zimbabwe (Case of Bindura town)

Author

Masiya, Marcia

Title

The Impact of bank lending on the growth of SMEs in Zimbabwe (Case of Bindura town)

Abstract

This research study is an investigation directed towards determining the impact of bank lending on the growth of SMEs in Zimbabwe mainly focusing on the town of Bindura. The main objective of the study is to assess the impact that bank lending has on the growth of SMEs in Zimbabwe, determining the challenges that are being faced by SMEs in accessing credit from banks, to explore the role in which the accessibility to bank loans enhances the performance of Zimbabwe's small and medium-sized businesses as well as to identify the principal obstacles banks encounter when attempting to provide credit to Zimbabwean SMEs. A mixed approach of questionnaires and interviews was used where 60 questionnaires were given to SMEs in Bindura targeted towards both SMEs owners and employees. Interviews were also conducted with a total of 8 bank employees and loans officers from 2 banks. Purposive sampling was used to select respondents and descriptive statistics used to analyze the data from SPSS. The study found out that bank lending is making a positive impact towards the overall growth and performance of SMEs in Zimbabwe. Those who have managed to access credit from banks are able to develop their businesses in terms of infrastructure, purchasing better equipment and dealing with better suppliers which is leading to them producing standardized goods and services that attracts more customers. Another important issue that was found from the study are the challenges that some of these SMEs are facing when trying to access bank loans which included lack of assets to use as collateral high interests charged on the loans. The study therefore recommended that it is important for banks to offer tailor made products for these SMEs so that they are able to access credit and operate effectively without financial struggles. They can also create products with lesser collateral requirements and specific industry-based loans especially for towns dominated by industries like the town of Bindura. The study also discovered that banks are also facing challenges in them trying to extend loans to these SMEs which included the fact that some of these SMEs are failing to pay up their debts on the agreed time. Another challenge is the instability of the Zimbabwean economy and the continued fluctuations of currency in Zimbabwe, this is increasing the overall risk environment for banks. The researcher suggested that the researchers in the future researchers should put more focus on how banks can improve their relationship with SMEs so as to give them awareness on how they can benefit and take advantage of the loans provided by these banks. This will help the banks, the economy of Zimbabwe and also the SMEs to grow and emerge since finance is one of the core organs for business survival.

Date

June 2024

Publisher

BUSE

Keywords

Bank lending

SMEs

Bindura town

growth of SMEs

Supervisor

N/A