THE Reserve Bank of Zimbabwe says it is using moral suasion to encourage banking institutions to set up business units dedicated to serving small to medium enterprises (SMES).
RBZ deputy director for bank supervision Ms Audrey Hove said recently that while the country recognises the need to finance SMEs, it does not have a law to compel banks to do that.
Through moral suasion she said at least 13 banks have set up SMEs desks.
“At the moment the country does not have a law that compels banks to set up SME business units that will be specifically dedicated to serving the needs of entrepreneurs in that sector.
“Whether there will be a law to compel banks to set up SME business units or not, I do not know. However, at the moment as RBZ we are using moral suasion to encourage banks to set up SME business units,” she said.
Over the years, the SME sector has raised concern that due to the absence of SMEs desks, support from the financial services sectors has been limited.
As a result of such limited support and lack of collateral security, SMEs have found it difficult to access funding from banks to boost their operations.
This has seen SMEs going out of their way to borrow working capital from loan sharks whose interest rates were unreasonably high.
Against this background, the monetary authority is, among other initiatives, in the process of drafting the Movable Property Security Interest Bill, which if passed into law would make it easy for SMEs to use movable property as collateral security when borrowing.
The SMEs sector plays a critical role in economic development as it contributes about 60 percent to the Gross Domestic Product.