Challenges and cash shortages for entrepreneurs in Zimbabwe

Lendwithcare's Microfinance Advisor Teresa Hall has been visiting our microfinance partner in Zimbabwe, Thrive Microfinance. While there, she has had the opportunity to meet with Lendwithcare entrepreneurs, and to learn more about how the current economic situation has been affecting their lives and businesses:

"I have been in Zimbabwe visiting our microfinance partner Thrive. I have had the opportunity to meet and speak with women entrepreneurs supported by Lendwithcare.

Street vendor in Chitunwiza

The economy in Zimbabwe has been slowing for several years, and the current cash shortage has further impacted an already fragile economy. Credit and debit cards are not widely used, and "mobile wallets" are much more common. According to the last Global Findex report, in 2014 more than 30% of all adults here had a mobile money account, and it is now estimated that more than 65% of the population now use mobile money. Mobile money users can receive, transfer and, until recently, withdraw money from shops and other retail outlets using their mobile phones. However, developing economies like Zimbabwe's, with a large sector of the population working in the informal economy, are more reliant on cash. For example, a man selling vegetables from door to door, or a woman running a stall at a side of the road, would generally trade in cash.

Peggy Nevasha from the Almond Group, who runs a stall by the road

In October 2016, a limited amount of "bond notes" were introduced, but this has not really alleviated the problem. The bond notes were supposed to be pegged to the US Dollar, but, in reality, it does not work that way. Zimbabwean people remember the hyper-inflation of the Zimbabwean Dollar (in circulation from 1980 to 2008) and so have not welcomed the bond notes. After their introduction, many people decided to hold on to any US Dollars they had or could get hold of, by cutting expenditure and buying only the bare essentials. This move has exacerbated the cash shortage issue and has slowed the economy down even more. In any case, there are not enough bond notes in circulation. People will only accept bond notes when they want to withdraw money, but even then they are limited.

One of the most noticeable aspects of the cash shortage is the long queues every morning outside every bank or digital mobile retail outlet. The queues form long before the banks open. People want to make sure that they will be able to withdraw money before it runs out.  The amount of money that people can withdraw or cash is also restricted – often only $50 per week, regardless of how much money they have in their account. When the money allocated for that day is finished, the customers are simply asked to come the following day.

The cash shortage has affected each and every one of the Zimbabwean entrepreneurs supported by Lendwithcare.  Over the last few days I have interviewed some of these entrepreneurs. All of them say that their businesses had been doing well, or even very well, until the beginning of this year, when everything began to change. One of the reasons is the significant waiting time now required before they can cash the loans received from the Microfinance Institution. This can be many working days, and sometimes as much as 2 weeks.

Thrive Microfinance tries hard to disburse the loans, but because of this cash shortage, they cannot always manage it. They also receive the repayments from the entrepreneurs by transfer, rather than cash. The delays that the entrepreneurs have to endure before they can cash their loans have an impact on the turnover time and mean they are also late in making repayments to the microfinance organisation.

The other factor affecting entrepreneurs is that their sales have slowed down. “People want to buy my things,” said Angelica Mumba, an entrepreneur who sells kitchenware at a stall outside her house, “but they simply cannot use their own money.”

The cross-border traders have been particularly affected. To them, the Bond notes are useless, even if they could get hold of them. They need US Dollars to buy South African Rands, Zambian Pulas or other foreign currencies so that they can restock.

The Zimbabwean people are resilient, hard-working and strong. They tell me they have seen worse and that they will manage to get through this too. And I have no doubt they will.  Some of the cross-border traders are diversifying into other businesses that are not so dependent on acquiring US Dollars.

The women entrepreneurs I have spoken to told me all they had achieved in the years they have been running their businesses with the help of loans. They spoke of the satisfaction they get from being able to support their families and make their lives more comfortable. They told me about their joy in knowing that they are making it possible for their children (and often grandchildren) to have access to education.

They talk about the serious economic crisis they are going through, as if it is a note in the margin.

I feel a great deal of respect for the people I have met here. I feel humbled to have the opportunity, through my loans, to support these great and inspirational women and their families.”

Teresa Hall

Microfinance Advisor to Lendwithcare

18.02.2017