Nelson Gahadza–Senior Business Journalist
JHE Reserve Bank of Zimbabwe (RBZ) said the Collateral Registry, a record keeping system for the existence of security, would be launched by the third quarter of this year.
The Collateral Registry, a publicly accessible database of interests or ownership of movable property, will allow borrowers to prove their creditworthiness and potential lenders to determine a borrower’s creditworthiness against their collateral.
Inventorying assets against which financial institutions may be able to lend to previously excluded groups would enhance financial inclusion, as advocated by the National Financial Inclusion Strategy.
Personal property collateral that can be used as security includes equipment, inventory, accounts receivable, agricultural produce, household goods and bank accounts.
RBZ Deputy Director of Banking Supervision, Rachel Mushosho, during a panel discussion at the launch of the Sivio Institute’s investigative report on the state of financial inclusion of micro, small and medium enterprises ( MSMEs) in Zimbabwe, said banks would be able to lend to SMEs put on the register.
“In most cases, banks only want real estate as collateral, but as RBZ, by the third quarter, the collateral registry will be launched and SMEs will be able to use movable property as collateral,” he said. she declared.
She noted that the process was lengthy as it involved external licenses and required the passage of legislation by Parliament.
“So this should be launched to ensure that SMEs use the movable assets they have and register to borrow money from banks using them as collateral.
“We have also developed a credit registry.
Banks usually say SMEs are at risk, youth at high risk, women at high risk, but if they have a benchmark where they say they want to see credit history, they may be able to lend on it,” Ms. Mushosho said.
The RBZ is currently working on a second National Financial Inclusion Strategy (SNIF2), which would run from 2022 to 2026, with a particular focus on the most vulnerable groups in the country.
The central bank has identified both in the framework of SNIF I (2016-2020) and the future SNIF II (2022-2026), SMEs, young people and women as target groups that are currently financially excluded.
According to the Sivio survey, around 56% of MSMEs are financially excluded from the formal financial system, largely due to issues related to registration compliance and lack of financial products for the sector.
Ms. Mushosho said that according to the RBZ’s quarterly loan disbursement indicators, of the total banking sector loans of $300 billion issued as of March 31, 2022, SMEs had access to only 3.9% of the total. total amount disbursed.
“So we’re not lost in the fact that usage is very low. That’s why we come up with strategies to make sure the products meet their needs so they can use them all the time,” she said.
She said NSFI1 was focused on financial access and numbers had increased, but little had happened beyond opening accounts. “As part of NFSI2, we intend to examine the use of formal financial services.
“We are looking at the quality of these financial services because it cannot be a one-size-fits-all solution. We are working with different stakeholders and financial actors, to say can you offer tailor-made products,” she noted.
The Sivio Institute, in its survey report, said that small and medium enterprises in Zimbabwe struggled to register their businesses as the registration process was complicated.
Tendai Murisa, Executive Director of Sivio, said at the launch that the national MSME average for financial inclusion was 44%.
“However, there are other regions which are below the national average such as Midlands, Masvingo and Harare which are close to the average.
“Provinces that are doing well are Matabeleland South and Mashonaland West are above the national average.
“But there’s nobody in the 70% with everyone around 50%,” he said.
He said MSMEs indicated that the registration process is complicated and there is no decentralization and the cost of registration is also high.
“Once you sign up the cost of compliance year on year is high and it pushes a lot of people into informality and once they are like that the banks can’t deal with it anymore. ‘them,” Murisa said.
According to the survey report, micro-enterprises are widely involved in the retail, vending and agricultural sectors.
The report indicates that the average annual turnover of micro-enterprises was US$7,589; the average for small enterprises was US$76,647 and the average for medium enterprises was US$803,022.
The survey indicated that business founders use many funding sources to gain sufficient access to start-up funding.
“80% of founders used their personal savings to start their business. Informal relationships are more important for business development in Zimbabwe than relationships with financial institutions.
Only 7% had recourse to banks and 6% to microfinance institutions to obtain financing. Government, credit unions and local NGOs provided start-up funding for only 1% of businesses.
According to the report, mobile phones and fintech have improved rates of access to financial products and services.
According to Murisa, the report revealed that the most important services, including mobile money services, are provided by Econet Wireless through the Ecocash platform and ZIPIT Smart provided by ZimSwitch.
“We found that up to 97% of all MSMEs using mobile money will at some point use Ecocash, 30% will use ZIPIT Smart and up to 19% will use One Money.
The survey report indicates that more than half of businesses in rural and urban areas have a mobile money account.
Australian Ambassador to Zimbabwe, Bronte Moules, in her opening remarks at the launch, said financial inclusion could make a key contribution to inclusive economic growth in Zimbabwe.
“Without access to basic financial services, the benefits of economic growth and private sector development will not be effectively distributed among the poorest, and persistent barriers to social, economic and political inclusion will persist,” he said. she declared.
She noted that the Australian government fully recognizes that financial inclusion is an important catalyst for economic growth, private sector development, gender equality and poverty reduction.