Small Medium Enterprises

Small and Medium Enterprise (SME) finance encompasses bank account services, credit, insurance, and various forms of payment services. Since the early 2000s several new players have entered the Zambia SME finance sector: Banks have established departments focused on SMEs, and new models for SME agricultural finance have emerged. In spite of this, access and use of financial services by Zambian SMEs remains low, especially in rural areas. While banks often state their public commitment to building SME portfolios, it is clear many of them remain cautious and lack both the infrastructure and capability to meet growing demand.

FSDZ’s goal in the SME Finance sector is to stimulate the market to increase the volume of financial services accessed by SMEs, and to increase the number of SMEs accessing services. This is based on the premise that increased access to financial services by SMEs will improve income opportunities through the creation and management of assets and will lead to improved management of risks and cash flows, helping SMEs to thrive.

Certain typical SME characteristics, such as informality, lack of reliable financial information, perceived lack of business skills, family owned structures, and inability to pledge adequate collateral to access credit, discourage banks and non-bank financial institutions from serving SMEs. As a result, the plight of the ‘missing middle’ prevails.

At FSDZ, we believe a healthy economy and bank SME portfolio is characterised by a mix of small, medium and larger businesses, with a tangible progression across this spectrum, and commercial interaction between players of different scale. Indeed, many economists argue that the real strength of an economy is a function of the size of the middle sector. FSDZ is therefore working towards dismantling the inefficiencies that inhibit progress of SMEs by working closely with financial service providers and other industry advocates of the SME sector.

To do this, FSDZ segments its work into three project areas:
• Improving supply and delivery of SME financial services
• Addressing information asymmetry
• Improving support services for SME financial service providers

FSDZ utilizes a team of local and international experts in the field of SME Finance to build the capacities of local institutions by sharing tools, building skills and documenting various initiatives and other activities for the purpose of sharing learning for more inclusive growth in SME Finance.