MSMEs Access for Finance in Zambia

Abstract

Micro, Small and Medium Enterprises can act as the engine of national economic growth for Zambia’s economy if they have access to market resources, including financing, and the right enabling environment.

This survey examines the level of MSMEs access to Bank Finance in order to determine the demand for and supply of financial services to the MSME sector, and the potential for broadening and deepening existing linkages between the banking community and MSMEs.

The survey finding shows that MSME operators understand little about the basic principles of commercial bank lending and borrowing practices.The survey also shows that commercial banks have limited experience with the MSME sector and lack the know-how to assess the associated credit risks, and are therefore unwilling to meet the sector’s growing demand for financial services. Banking institutions are concerned many MSMEs do not understand how to work with financial institutions and need to improve their business and credit practices before banks can look at the sector as a viable and profitable business. As a result of these historical perspectives, both the supply of and demand for MSME financial services are not being adequately addressed in Zambia.

For these sectors to understand each other very well, the BDS providers must intervene in reducing the level of mistrust by providing training that will help the MSMEs to be attractive to banks and organize workshops and technical training for bank staffs to better understand the MSMEs. This way the prospect for access to finance for Zambian MSMEs may improve.

Key words: Micro, Small, and Medium Enterprises; Business Development Service, Access for Finance