Trade financing an enabler of exports for SMEs

Is a key driver of economic development for any nation, thus the importance of Zimbabwe’s exports to economic recovery and growth cannot be overemphasised.

Foreign currency inflows play a critical role in ensuring the sustenance of the intended national development, given the current high dependence on imported raw materials as well as the supply of some key commodities and economic drivers, which Zimbabwe does not produce such as fuel.

As such, for trade to be more effective, there is need for it to be directly supported through adequate financing, which is a crucial cog in the development of the country.

Access to affordable finance is critical for the growth of exports across the world and especially for Zimbabwe as the country seeks to boost exports and spread its footprint across the globe.

Trade financing refers to financial products offered by any bank or financial institution that are specifically related to trade transactions, which include exports and imports.

In most cases, trade financing is recognised as an important lubricant of trade and the availability of such facilities is vital for a healthy and robust trading system.

According to the World Trade Organisation ( WTO), up to 80 percent of world trade is backed by some sort of financing or credit insurance and it is estimated to be around US$ 10 trillion a year.

Trade financing supports the flow of credit in various supply chains and typically assists companies manage their cashflows for international payments, associated risks as well as provide needed trade related working capital.

Thus, meaningful contribution to national exports by local businesses can be easily realised if financial institutions provide the necessary support by making available typical trade financing, this includes instruments such as lending facilities, Letters of Credit, export factoring/invoice financing, export credit and insurance.

Having the right instruments which are accessible to exporters and would-be exporters provides the requisite insurance, credit and payment guarantees to simplify the payment processes for the goods and services.

This plays a significant role in growing national exports.

There are various financial institutions in Zimbabwe which offer different instruments related to trade.

The primary aim of the provisions of such instruments by some of the institutions is to promote and facilitate Zimbabwe’s international trade, assist new exporters and small and medium-sized enterprises ( SMEs) to access export finance, boost production, and provide support that increases competitiveness of Zimbabwean exports.

Although financing to small businesses has continued to grow over the past decades according to the Reserve Bank of Zimbabwe ( RBZ), advancing export financing in Zimbabwe is often faced with various challenges, some of which include information asymmetry.

Access to finance becomes even more challenging for SMEs as generally smaller companies find it more difficult to access finance from banks, regardless of their contribution to the economy and that they constitute the bulk of companies in Zimbabwe.

Recent research by the WTO suggests that low or no access to finance by SMEs

can significantly impede formal SME development. Unfortunately Zimbabwean SMEs

are affected by this.

According to the RBZ, only about 3,78 percent of the total loans and advances by Zimbabwean banks go towards the SME

sector. This also translates to poor export and trade financing to a key economic and potential exporting sector.

According to the CZI Manufacturing Sector Survey in 2018, the number of firms which find it difficult and/or impossible to access funding at local banking institutions is concentrated in small firms.

This is probably because smaller firms are viewed as having higher risks by financial institutions as they may not be credit worthy.

Most financial institutions view SMEs as having higher chances of defaulting on loan repayments.

This is despite the decline in the non-performing loans to total loans from 3,95 percent in June 2019 to 1,75 percent in December of the same year, according to RBZ.

Consequently, banks demand collateral, guarantees, credit history and prefer dealing with “tried and tested” products/ services. In some instances banks charge higher interest to account for the risk, making it difficult for small firms to obtain the requisite financing.

According to the same survey by CZI, 38 percent of the respondents highlighted

“collateral” as the biggest challenge of accessing funding from the banking sector, supporting the need for reforms in the financial sector in order to allow companies and SMEs alike to gain access to finance.

According to CZI, since inception of the import substitution and export promotion initiatives, access to finance is still regarded and expressed as one of the key impediments to industrial development and to companies’ability to operate at full capacity.

Respondents to the same survey were asked on what the Government can do to stimulate exports and the majority of respondents highlighted the need for access to cheap finance for exporters.

Generally, all firms in Zimbabwe find it difficult to access funding at local financial institutions and if this does not change, the country’s exports will remain subdued.

Access to trade finance in Zimbabwe is regarded as one of the most problematic factors that are faced by exporting companies together with other factors such as access to imported inputs.

Given the contribution of small businesses to the economy, it is crucial that financial institutions create tailor-made financing that can be easily accessed by small-scale manufacturers and exporters.

According to the Monetary Policy Statement delivered by the RBZ Governor in February this year, financial “support to the micro, small and medium enterprises ( MSME) sector has the potential to promote value addition to the key sectors of the economy through diversification, export earnings and import substitution, which are all critical for increased economic output”.

Given technological advancements that have made it easy to analyse data, RBZ suggests that“lending institutions can leverage on the vast amounts of digitised alternative data including transactional (payments) data, behavioural data and social media data to determine capacity and willingness to repay loans”.

Such data analysis will ensure that financing partners do not stereotype all small businesses as having “bad” financial discipline, which in turn will open more credit lines for performing businesses.

With WTO reporting that multilateral trade financing programmes generated over US$ 30 billion in trade in 2014, it is imperative that more is done in availing trade finance to grow exports.

AST week we published an article by Chimaraoke Izugbara and Mary Obiyan titled “More must be done to fight bogus Covid-19 cure claims”, which stirred up a hornet’s nest. This week we publish here in part and online in full, academic Alex Munyonga’s contribution, “Global Coloniality through Science and Technology: The theft of African Traditional Medicinal Knowledge”.

This chapter is an extract from the book “Decolonising Science, Technology, Engineering and Maths (STEM) in an age of techno-colonialism: Recentring African Knowledge and Belief Systems” by Artwell Nhemachena and others.

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ARMED with financial, legal and cultural ammunition, Western countries scour the globe with the goal of looting indigenous knowledge.

They hunt for traditional knowledge from the world’s impoverished through deceitful antics. Africa has been a major victim of cultural terrorism from the West. Cultural terrorism entails the demonisation of African culture and all that is associated with it.

African religion, herbal lore and diet have been branded as backward. The West thus, branded Africa as a dark continent, incapable of any scientific discoveries. This chapter argues that such Western descriptions of Africa are misguided and prejudiced since Africans have been scientifically exceptional in the field of bio-medicine from time immemorial.

Gifted with abundant flora and fauna, Africans developed bio-medical knowledge that sustained them well before the arrival of imperialists. It is unfortunate that colonialism and its imperial machinations locked African medical knowledge in a cage of stagnation through unscrupulous legality and ownership mechanisms.

The Witchcraft Suppression Act is one such oppressive and suppressive legal instrument that branded African traditional medicine as backward.

The 21st century has seen no improvement in Western gaze on Africa as it is enveloped by post-colonial imperial frolics through bio-piracy, skewed patenting and other intolerant intellectual property rights claims.

Western initiated and directed herbal and medicinal researches on African soil, have proved to be a knowledge spy endeavour designed to identify and loot African traditional herbal and medicinal lore while reducing Africans to “hunters and gatherers” of knowledge.

In this respect, a new cultivar of global coloniality is manifesting through science and technology. However, people’s preference for traditional foods and herbs over genetically modified organisms and other allopathic and synthetic drugs in the world today, testifies the value of traditional medical knowledge in the 21st century.

The fact is not that Africans were and are devoid of scientific discoveries. Instead, the wealth of the African medical lore has and is still being stolen, plundered and cartelised by the giant Western pharmaceutical companies who use their political and financial stamina to entangle and drain African traditional medical knowledge for their own benefit.

Sadly, as the African-discovered drugs do wonders the world over, the African source of the patented knowledge is ignored. Even though royalty payments are proposed, such is not enough. Instead, Africans have to own and protect their medical knowledge.

This chapter, therefore, argues that Africa has to work on ownership and control mechanisms for their traditional medical lore.

benefit of humanity. Such, constitute the indigenous knowledge for that particular group. Science and technology bridged the gap between nature and human needs in traditional Africa.

African indigenous people were, therefore, the best architectures of science and technologies in their localities, especially in the field of bio-medicine. Africa enjoyed climatic and environmental advantages.

Madagascar, for example, is said to have 70 percent unique species of fauna and flora. Such an advantage gave Africa ample ground to experiment and discover herbal and medicinal qualities of fauna and flora that surrounded them. It needs to be highlighted that African metaphysical orientation gave the Africans unity with their fauna and flora hence a room to discover its herbal and medicinal qualities.

The herbal and medicinal knowledge was influenced by internal creativity and experimentation for livelihoods over a long period of time. Traditional medical lore, therefore, became an African brewed knowledge system that was owned, controlled and preserved by Africans, guided by African metaphysics, for the benefit of the African people.

African metaphysics is understood to reflect the African universe of experience and the reality of such experience (Etim, 2013). This was corroborated by Ozumba (2004) who remarked