An assessment of the impact of financial inclusion on the business performance of SMEs in the Harare Metropolitan

Abstract

SMEs are an essential engine to the development of the economy of the country. The leaders of economies across the globe have put in place strategies to ensure that the marginalised are financially included. The government of Zimbabwe has also considered financial inclusion as a top priority by putting mechanisms in place to ensure this goal is achieved. The main objective of this research was to assess the impact of financial inclusion on performance of SMEs in Zimbabwe with the dependent variable being SMEs performance and independent variables being access to financial products, financial innovation, financial literacy and financial consumer protection. Theoretical and empirical literature attempted to explain the relationship between financial inclusion and SMEs performance. An explanatory research design and a survey strategy in SMEs were employed for this study. A sample of 250 SMEs were chosen randomly from Glen View 8 Furniture Complex and Mbare Siyaso Complex. To answer the research question of what is the impact of financial inclusion on SMEs’ performance, a self-administered structured questionnaire was used to collect data and 205 questionnaires were successfully completed. The major observation was that there was a positive significant relationship between access to formal financial products, financial literacy, financial innovation and financial consumer protection and SMEs performance. A regression analysis showed that the four independent variables were predictors of SMEs performance. Financial inclusion is fundamental for SMEs’ performance. The study recommended that mechanisms must be in place to ensure easy access of financial products to SMEs. Financial literacy is required in SMEs to ensure appreciation of the importance of financial inclusion and be able to make the right financial decision. Financial institutions must be continuously innovative and embrace emerging technologies and bench mark with other countries to ensure the under-privileged access competitive products which can improve their operations and competitiveness. SMEs consumer protection contributes to improved performance of SMEs. It is imperative that SMEs are aware of the financial risks associated with being financially included. The institutions in Zimbabwe need to be strengthened and capacitated to play their role of enabling SMES to grow their businesses. It is essential that the banking sector executives engage SMEs when developing products targeted for them. A further research may be conducted to identify other factors not studied which affect financial inclusion in Zimbabwe.