FINANCIAL institutions are now required to commit 30% of their loan book to spur growth for small and medium enterprises (SMEs) as the country turns to the sector to drive industrialisation, Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono has said.
Report by Tarisai Mandizha
Presenting his first Monetary Policy Statement of the year, Gono on Friday said the central bank would conduct monthly assessments to monitor compliance, threatening to take action against non-compliant banks. This comes amid reports that some banking institutions, mainly foreign-owned, were reluctant to extend support to SMEs.
The contraction of economic activity and de-industrialisation has resulted in a thriving SMEs sector now widely seen as one of the viable sources of employment.
“Banking institutions are required to orient their portfolios such that loans to the SME sector should constitute at least 30% of the total loan book,” Gono said.
The new measure means that out of the current banking sector loans of $3,5 billion, at least $1,05 billion should be allocated to firms with an annual turnover ranging from $30 000 to $5 million.
Gono said the SME sector required adequate funding to unlock its potential as a source of rapid economic growth, poverty reduction, bridging current supply gaps in the economy and uplifting living standards in Zimbabwe.
He added that the take-off of the SMEs sector in the mining, manufacturing and services sector required that the banking sector re-align its loan portfolio to accommodate the sector.
“Given the benefits of a vibrant SME sector to the economy, it is imperative that banks were supportive of this sector through tailored products including loans and advances especially supply contract and order financing,” he said.
“As the loans grow each year, we envisage corresponding increase in the number of jobs created or people empowered by the banking sector.”
SMEs, according to Finance ministry figures, account for 50% of our gross domestic product.