Lack of tailored products hindering local firms from accessing finance – BOZThe Micro Small and Medium Sized Enterprises – MSMEs finance survey report has revealed that the lack of suitable and tailored products is among the critical challenges hindering ‘local’ business growth in Zambia.
The Bank of Zambia BoZ, in collaboration with various stakeholders, has officially launched the Micro, Small, and Medium Enterprises (MSME) Finance Survey 2022 report which provides insights into the financing needs, constraints, and preferences of MSMEs, highlighting areas that require attention and intervention.
The main challenges highlighted include the high cost of credit, lack of collateral and proper documentation, low-income levels, as well as unsuitable loan products that do not meet the needs of the MSMEs.
As to be expected, these factors limit the ability of MSMEs, or more specifically ‘local businesses’ to access credit to invest, expand, and create jobs in the economy.
Speaking during the launch MSMEs financial Survey Report, Bank of Zambia Governor Dr. Denny Kalyalya said addressing these barriers is essential to unlocking the full potential of local firms for them to upscale and prosper, and thus be able to play their much-expected viral economic growth role.
Dr Kalyalya recognized the importance of the MSME sector in contributing to economic activity and poverty reduction (wealth creation) in Zambia.
Dr. Kalyalay explained that as a response to the general complaints about the challenges this important sector faces concerning financial access and to support these efforts, the Bank of Zambia undertook the MSME Finance Survey to provide the much-needed information required to understand the landscape, behavior, and challenges faced by MSMEs.
Dr.Kalyalya added that only 3 percent of startup capital was sourced from formal Financial Services Providers (FSPs), while 7.3 percent of MSMEs applied for a loan during the five years prior to the Survey (2017-2022).
“Furthermore, the report highlights the importance of fostering a conducive regulatory and policy environment that supports MSME development. Simplifying regulatory processes, enhancing financial literacy, promoting innovative financing mechanisms as well as establishing relevant infrastructure and market linkages are some of the measures that can help MSMEs overcome obstacles and thrive in today’s dynamic business environment.”
The Bank of Zambia Governor has since urged all key stakeholders, notably, policymakers, regulators, FSPs, and MSMEs themselves, to leverage the solutions provided in the report to inform their decision-making and actions.
The Bank of Zambia governor believes that by working together and implementing targeted interventions, they can address the challenges facing local enterprises and create an enabling ecosystem where they can drive economic development through innovation and more job creation.
“By working together and implementing targeted interventions, we can do a better job of addressing the challenges facing MSMEs (local firms) and create an enabling ecosystem where they are able to drive economic development through innovation and job creation.” Remarked Dr Kalyalya.
Speaking at the same event Ministry of Finance and National Planning Secretary to the Treasury, Felix Nkulukusa said the Government is actively exploring various fiscal policies to enhance private sector investment in micro, small, and medium enterprises.
“Given the challenges still faced by local enterprises (MSMEs) in accessing credit and formalizing business, there is a need for a coordinated approach by the Government and key stakeholders to develop national policies, strategies, and interventions that would enhance financial literacy levels and access to finance for MSMEs.” Said Nkulukusa.
Meanwhile, the Ministry of Small and Medium Enterprise Development, permanent secretary, Subeta Mutelo said The dissemination of the survey report marks an important milestone in the journey towards supporting the growth and success of MSMEs in Zambia as it provides evidence-based recommendations that will guide our policies and interventions in the coming years.
Mutelo said about the recommendation for the Ministry to initiate the development of legislation specifically targeted at supporting MSMEs, the Ministry has commenced the process of facilitating the development of legislation to support the growth and development of the micro, small, and medium enterprises, particularly by addressing the unique needs and challenges they face, such as accessible financial products and services.
She said through this legislation, the Ministry aims to provide a conducive environment for MSMEs to thrive and access the necessary financial support for their growth and development and ultimately resulting in the growth and development of the country.
