INTUITIVELY it is well acknowledged that the MSME (micro-small and medium enterprises) sector is contributing immensely to the overall economic lifeblood of the economy, providing livelihood through self-employment opportunities for many while the larger SMEs are creating employment for others beyond their immediate proprietors.
The small business sector in Zimbabwe generally plays an important role not only in providing those goods and services that would be unsuitable for large formal businesses such as hair salons and carwash parlours, providing a large distribution network for the formal businesses.
In our case in Zimbabwe the major distribution networks for the largest companies in the telecoms and beverages sector consist largely of informal traders, highlighting the importance of small business sector.
In serving the small business sector, banks have observed some challenges faced by players in the sector. These observations will soon be formalised in the form of an exhaustive research study that the body of banks in the country has commissioned in pursuit of understanding the inner working of the small business sector, with the ultimate aim of responding more appropriately to the financial needs of this sector.
Banks have observed aside from the traditional issues surrounding small businesses, a key weakness in the sector is the fragmented and fractured structure of the MSME sector.
This attribute contributes to the fuzziness of the lense through which policy makers and other stakeholders view the sector.
The apparent disorderliness that characterises MSME operations at the business level and the sector at large normally evokes negative emotions about the sector from the various stakeholders, be it the general public, government, local authorities, bankers and many others.
The negative views solicited negate and cloud the important economic role the MSME sector plays in the economy.
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The power of self organisation There is no better way of stating a well known truism, which says “There is strength in numbers”. Part of the solution to the negative perception problem for informal sector players lies in what we can call, “the power of self-organisation”.
Many formal sector players, particularly banks, would like to encourage MSMEs to be organised in accordance with their specific sub sector or product clusters, either by location or simply through association and membership to an organised voluntary self regulating body. Such bodies should typically be financed through regular members contributions or some other mechanism that creates and instils a sense of ownership, belonging and accountability in the members.
Admittedly there are some such bodies, but more should be done in the MSME sector. This strategy would help MSMEs on a number of fronts.
Speaking with one voice This is important when engaging other stakeholders. For example negotiating with local authorities for operating spaces and facilities becomes easier.
Even lobbying for favourable changes in by-laws, or licensing conditions may become easier if MSMEs are speaking with a unified purposeful voice. However, care must be taken not to reduce to SME structure into a cartel like arrangement which will face stakeholder resistance.
Self regulation The ability to self regulate members according to a constitution of membership always results in stakeholders taking MSME enterprises seriously.
Membership bodies that take exception to errant behaviour by members, encourage a sound business and moral code in their members, building a successful common basis for the success of individual enterprises and the collective whole.
Pooling and raising own resources Small business clusters can pool and mobilise financial and entrepreneurial resources making them attractive partners for a variety of formal business service providers.
A clear example in our midst is the local informal funeral insurance entities commonly known as burial societies. Some housing co-operatives also fall into this category. Members successfully mobilise resources to augment formal sources of finance.
Such initiatives by small business organisation will portray an image they are purposeful and serious. Making them attractive partners for the banks
Flow back of benefits Naturally MSMEs would not want to join an organisation from which benefits do not flow. They would have no incentive to make their contribution of the necessary levies that keep the associations going.
There must be a very visible flow of tangible and goodwill benefits of belonging to such bodies. This could be in the form of access to finance, opportunities for growth, capacity building training and development, facilities to operate from and so on.
Development of market linkages Well organised SME sector organisations not only improve accountability and order within the membership, but help make it easier for stakeholders to identify opportunities for market linkages among players in the MSMSE sector itself and also between the MSMSE sector and the formal sectors.
For example, a well organised furniture-making association at Glen View, Harare, would be more likely to be able to clinch a large order to supply lounge suites to a large local furniture retailer than single members negotiating individually.
In short, if the MSME sector self organises into strategic value clusters, it also becomes possible for formal businesses to quickly and easily identify potential areas of value chain linkages with other key stakeholders.
Banks will for example be able to structure more suitable and sustainable value chain financing tools necessary for the growth of the MSMSE sector.
Clive Mphambela is a banker. He writes in his capacity as advocacy officer for the Bankers’ Association of Zimbabwe. BAZ expressly invites players in the MSME sector and all other stakeholders to give their valuable comments and feedback related to this article to him on [email protected] or on numbers 04-744 686, 0772 206 913
