Produce quality goods, SMES told

Kudzanai Gerede
Small and medium enterprises (SMES) in the country should endeavour to produce quality products and services if they are to stand any hopes of accessing finance from the microfinance institutions in the country, Zimbabwe Association of Microfinance Institutions (ZAMFI) executive director Mr Godfrey Chitambo has said.

In an interview with The Manica Post Business recently, the ZAMFI boss lamented the poor services and products which most SMEs in the informal sector were offering the market, calling them substandard and reiterated that microfinance institutions (MFIs) were not prepared to take the risk of lending such business ventures.

The Ministry of Small to Medium Enterprises, however, shifts the blame to local MFIs, arguing that SMEs were producing quality products only to be let down by MFIs. This comes in the wake of allegations that MFIs in the country have not been playing their part to promote small businesses through offering lines of credit but prioritise providing services to already established companies.

“Let me be honest, if you look at the informal sector, your level of satisfaction with the products being produced by some of the people in the informal sector is not satisfactory. The truth of the matter is these guys are producing substandard goods. First and foremost, we are not really putting our money where our mouth is. Government is talking about the informal sector being the engine for growth, this engine does not have fuel, it simply cannot move.

“Teach the SMEs how to make the good product, once the product is good then we fund them. We want to fund SMEs but there are no credible SMEs,” said Chitambo.

He said this on the background of some SMEs who have approached MFIs without a clear business strategy in case of risks on their businesses and on how they intend to market their products once they are funded.

Standards Association of Zimbabwe director general Dr Eve Gadzikwa is on record calling for SMEs to improve not just on the actual product but also on packaging, labeling and marketing strategies among other areas.

Most of the informal players’ business ventures are of no fixed aboard, which even makes it difficult for an MFI to lend money. He said because of scarcity of cash in the country which was fuelling competition for borrowing, MFIs were willing to lend money where they deemed credible as they are not prepared to risk lending reckless business ventures.

Due to an increase in the informal sector and the liquidity constraints prevailing in the country, ZAMFI says of its 155 registered MFIs countrywide, they have only managed to provide for only 21 percent of total demand during the previous year, which was precipitating high interest rates by some MFIs as the demand was high. He, however, said his organisation was using moral persuasion to knock sense into some of their members who were charging absurd charges to clients as they were not legally bound to impose interest rates to local MFIs.

He encouraged small businesses, especially those in the rural areas who are into agro-based businesses to use the Gramini (village) method, which entails group lending as a way of accessing microfinance.

Group lending involves opening a savings account as a group several months before the start of the business and deposit the little that has been raised to a nearest bank before approaching an MFI for a big loan.

The small savings account will then be used as collateral for one or more members of the group who will default on their monthly repayment of the loan from the MFI.