AN online funding platform for small-to-medium enterprises (SMEs) that has been undergoing compatibility tests in Zimbabwe has been launched by the Financial Securities Exchange (Finsec), effectively widening the country’s capital markets.
Finsec has been working with the United Nations Capital Development Fund on the project known as the Growth Enterprises Market (GEM).
The GEM platform gives enterprises a chance to apply for funding and possible listing online. It is designed to assist SMEs connect with a diverse range of capital raising options through the securities market infrastructure.
“The positive outcome of the feasibility and pilot has now paved way for the full implementation of the platform,” Finsec said this week.
“It utilises alternative data analytics through integrations to financial services providers of the applicants and uses digital algorithms, including in-built artificial intelligence capabilities to analyse, score and screen applicants for suitability of funding in real-time.
“In addition, the platform admits nominated advisors online and provides them with a pipeline of applicants that may require advisory services to strengthen their applications.”
The technology-based funding platform will come in handy for hundreds of Zimbabwean firms that have struggled to access funding in a domestic market that has been undermined by endemic financial sector weaknesses.
Following years of de-industrialisation, compounded this year by the outbreak of the Covid-19 pandemic, business lobbies say domestic firms require up to US$2 billion to import machinery, raw materials and other requirements.
According to the Confederation of Zimbabwe Industries (CZI), funding of this extent may be difficult to access in domestic banks, which it says are too weak.
CZI president Henry Ruzvidzo said a solution could only be found if foreign lines of credit are mobilised to salvage companies.
Digital funding platforms by their nature are well-placed to reach beyond national borders for companies’ capital requirements, experts said this week.
Finsec said GEM admits financiers who can register as qualified investors after demonstrating their investment experience and understanding of investment risks.
Institutional investors, fund managers, corporates, high net worth individuals, people living in the diaspora, foreign investors and development finance institutions will be eligible to participate as qualified investors and can all register online.
“Growth enterprises and SMEs remain the anchor for sustainable economic growth through employment creation, enhanced capacity utilisation, import substitution, financial inclusion and general improvement of livelihoods for Finsec noted citizens,” Finsec noted.
“In both developed and emerging economies, SMEs are the highest contributors to economic activity, growth and development.”
Finsec said its feasibility study and pilot programme was delayed by the outbreak of Covid-19.
However, it brought results that enabled participants to fine tune the GEM platform based on feedback from targeted SMEs and other market participants.
Finsec said during the pilot phase, 17 SMEs across various sectors, two leading fund managers, four nominated advisors, two commercial banks and one mobile money operator registered on the platform to play various roles in facilitating the identification and funding of deserving high growth SMEs.