Barriers to accessing innovative financing techniques for small and medium enterprises (SMEs) in Zimbabwe: The case of SMEs in Harare

Abstract

The research sought to examine the barriers to accessing various sources of finance by small and medium enterprises (SMEs) in Zimbabwe. The struggling by Zimbabwean based SMEs to raise sufficient funds for commencement and expansion, inter alia, has prompted the researcher to examine the barriers to accessing various sources of finance. The objectives of the research were to determine information symmetry on financial products among SMEs and whether it is a barrier for SMEs to access innovative finances; to assess whether the level of confidence in the financial system by SMEs is a barrier for them to access innovative finance; and to develop policy recommendations to policy makers, financial institutions and SME representatives on new approaches to minimise barriers to accessing innovative finance by SMEs.. An explanatory research design with mainly quantitative data and less of qualitative data was adopted. A questionnaire was used as a research instrument. A case study involving SMEs in various trades like clothing, construction, hardware, electronics and groceries in Harare CBD was done, using a sample size of 286 respondents, with an 80.01% response rate. The key finance decision makers were involved as the respondents. The results showed that although SMEs were aware of various financial products offered by financial institutions, there was information asymmetry among SMEs of the various sources from which they could get alternative sources of finance other than equity and leasing, hence information asymmetry was found to be a barrier. The results indicated that the SMEs lacked confidence in the financial system and this was a barrier to accessing some form of finances by SMEs. The respondents suggested that the government helps banks restore public confidence in banks. It was recommended that the central government takes part in assisting SMEs, such as by tax cuts, tax holidays and grants, which all would increase equity necessary for expansion. It was further recommended that the Ministry of Women Affairs, Community, Small and Medium Enterprise Development educates SMEs more on how they can raise finances, including other recommendations. Further researchers were recommended to use other methodologies other than the one used in this study, and to use other SMEs than those in Harare