SMEs financing through the capital market in Zimbabwe: possibilities, benefits and constraints.

Abstract

The purpose of the study was to assess the possibilities, constraints as well as benefits of financing SMEs through the capital markets in Zimbabwe. The study conceptual framework was guided by the firms financing theory, the pecking order theory, the tradeoff theory as well as the agency theory. Data was collected through an online semi structured interview of a target population from three main groups comprising of SMEs owners, financiers and representatives from the financial regulators. Data was compiled and organized, thematic data analysis was used to interpret meaning. The research findings revealed that lack of information, costs as well as lack of financial education among SMEs owners are the major constraints hindering small business participation in the capital markets. The study recommended that capital market authorities should partner with government to establish an information gathering and dissemination center. Efforts should be made to increase the level of awareness of capital markets operations among financiers and small business owners. The research further proposes that future studies should investigate why SME markets seem to fail to attract many small firms and whether these reasons lie on the supply or the demand side of funds. And also future researchers may extend the frontiers of knowledge by making a comparative analysis between money and capital market operations regarding SMEs’ financing in a developing economy.