Mugabe slams Zimbabwe banks

President Mugabe has slammed banks for failing to harness the $7.4 billion believed to be circulating outside the formal economy saying it was a disturbing fact after it emerged that only 14% of small enterprise business owners are banked.

Speaking at the launch of the Finscope SME survey this afternoon, President Mugabe said he was disturbed by the fact that $7.4 billion is circulating outside the formal banking sector and yet the banks were not handling their services honestly in order to accommodate SME's.

The latest banking figures show that total deposits are at $3.7 billion. According to the survey, 43% of small business owners are financially excluded while 50% use informal mechanisms to manage their business finances.

18% of business owners are formally served, including both banked and other formal non-bank products or services while 14% are banked.  Only 3% use a bank account in the name of the business. Across provinces the survey reveals that levels of financial inclusion are higher in urban areas (64%) compared to rural areas (53%).

He said SME's were one of the major reasons why the Zimbabwean economy had not melted to zero due to western-imposed sanctions but banks had not put in place the requisite conditions to encourage SMEs to bank their money.

"The banking sector, should design products and schemes that attract these SMEs to bank with them. It is necessary to mop up liquidity from small business which, in turn, is used to increase cash flows", he said.

President Mugabe also urged banks to put in place reasonable interest rates saying; "it is only when people have confidence in a bank that they can start banking with it hence they should earn confidence from people", he said.

He also slammed some indigenous bankers for abusing depositors' funds through a get rich quick mentality.

The report shows that only 15 percent of SMEs owners have their business registered and 71 percent of these are registered with local authorities and other statutory bodies. Only 2 percent are registered with the Zimbabwe Revenue Authority.

President Mugabe also urged the SME business owners to register with Zimra highlighting the high level on informality in the sector; about 85 percent of these businesses are not registered

"The need to formalize these the operations the operations of the small businesses is of paramount importance, it is necessary to come up with packages and incentives meant to encourage the SME  players to formalize through registration", said the president

He said government is putting in place measures to support SMEs through the provision of finance facilities, training facilities as well as the necessary technology which is fundamental for the development of these businesses.

President Mugabe further called for support of the SMEs from ministries and relevant organisations to mainstream issues of SMEs into their strategic planning processes in order to facilitate provision of the necessary infrastructure and support services.

He commended the Ministry of SMEs for their immense contribution towards employment creation and poverty alleviation, a total of 5,7 million jobs according to the survey were created, of the estimated 5,7 million jobs, 66 percent are found in the rural areas and 34 percent in the urban areas. President Mugabe further called for the crafting of schemes and packages designed to promote female-owned businesses in line with broad-based women economic empowerment. 66% of the SME's are owned by women.

According to the survey, 46% of the adult population are SME owners with Mash Eact having the highest proportion of that at 56%. Harare has the lowest proportion of SME owners at 38%.