The analysis of financial inclusion and its impact on the sources of finance for entrepreneurs: a case of small and medium entreprises (SMEs) in Harare, Zimbabwe

Abstract

The importance of Small-to-medium enterprises (SMEs), especially in developing countries, cannot be overlooked. Towards economic development, all-inclusive financial access or financial inclusion and financing of these entities (SMEs), is of great importance to developing nations like Zimbabwe. The aim of this research was to investigate on the impact financial inclusion on sources of funds for entrepreneurs in Harare. A multiple case study was used and data was collected through face-to-face semi structured interviews. A judgemental sampling technique was used on 14 participants. The results showed that financial exclusion impact the ability of SMEs to access funding for their businesses via trade credit, venture capital and business angels. The study found that lack of trust and corruption on the part of banks; misinformation, inadequate information and awareness about trade credit on the part of SMEs, where the limitation SMEs face in accessing trade credit. The research also found that lack of basic business knowledge is one of the biggest challenges SMEs faces in Zimbabwe in accessing business angels. Lastly, the research found venture capitalist unwillingness to support SMEs, lack of financial knowledge, understanding and expertise are the barriers hindering SMEs from accessing venture capitalist finance in Zimbabwe. The study concluded that financial exclusion is the major obstacle faced by SMEs in accessing funding in Zimbabwe. The study recommended that SMEs should come up with associations which will help those though business trainings, mentorships, knowledge transfer to increase their chances of attracting venture capitalists and business angels. The study also recommended the government authorities to create policies that bring about an enabling legal, regulatory and operating business environment for SMEs to develop and be formalized. Additionally, the government should come up with polices to curb corruption, mistrust and also avail information to SMEs about various sources of funding.