Covid-19 stifles SMEs

Albert Chavhunduka

Development finance institutions are reeling from the after effects of the Covid-19 pandemic which they say affected their services and hampered access to banking facilities for many of their clients leading to the worst underperforming loans.

Covid-19 affected many economies globally and disrupted livelihoods for millions of people especially those dependent on the informal economy.

Addressing stakeholders recently during the Micro, Small and Medium Enterprises monitoring workshop, Small and Medium Enterprises Development Corporation (SMEDCO) Risk and Compliance manager Bigboy Mazhandu said the Covid-19 pandemic negatively impacted his institution as well as their clients.

Mazhandu further expressed concern over the failure by SMEs to repay back loans which were extended to them adding that some small businesses were forced to shut down as a result.

“Due to Covid-19 and the restrictions, monitoring these SMEs also became a challenge even those who were in the retail sector, we couldn’t monitor them because of these restrictions, which resulted in a high underperforming loan,” said Mazhandu.

“This affected their cash flows and as a result they could not pay back their loans. It also affected their continuity, some even folded and that’s a challenge we faced as an institution.

“In terms of the interventions that we came up with as an institution, we had to come up with a programme for refinancing those who had failed to make it during the Covid-19 period, either refinance or reschedule so that the loan tenure is extended.”

Mazhandu further said SMEDCO lost a lot of revenue from its infrastructure rentals and the lockdown made it difficult for non-essential services which in turn affected the whole chain supply.

“Most SMEs were not classified as an essential service sector, so in terms of their revenues dwindled, shortening hours and some were not even allowed to operate during the lockdown,” he said.

“We also provide infrastructure, where SMEs are supposed to pay rentals but because of Covid-19, SMEs were not operating which means they were not paying rentals. It also affected us as an institution because at some point SMEDCO was not regarded as an essential services provider, we were closed which affected the whole supply chain.”

Zimbabwe Women Microfinance Bank Head of Retail Clara Mukosera weighed in and said that as financial institutions, they lost most of the money they had disbursed before the Covid-19 pandemic since it was not invested but used for other purposes.

“You’d find that most of the money that we would have disbursed just before the Covid-19 outbreak found its way to the table, as many women were just fighting to put food on the table because they could not produce,” said Mukosera.

“At one point, we disbursed some loans but because of lockdown our women could not procure raw materials required in line with the different lines of businesses they operate. As a result, the challenges during the Covid-19 period were for both our microbusinesses and SMEs as well as for the institution itself to be able to balance sustenance.”

She added that as a bank, they could not provide any service to their clients mostly women which became a challenge due to poor loan disbursements because of Covid-19.

“Even when small markets availed themselves, you’d find out that the pricing strategy itself would be mostly to get rid of rotting produce, which meant that the loan itself could not be repaid because of the pricing that they ended having to work with,” she said. 

“As a result of these real challenges, it obviously meant that we were not going to get the money back and empower them in line with our initial strategy. They ended up with a lot of wastage where stockpiles of perishable items so automatically that a person would not be able to pay back the loan and these are real challenges that we were walking the journey together with our customers.”

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