SME financing in dollarised multicurrency system: Zimbabwe case study
The research was carried out with the objective of establishing an ideal source of capital for Small and Medium Enterprises (SMEs) financing in a dollarized multicurrency system. The overarching research question was premised on whether equity is the ideal source of capital over debt capital for SMEs financing. The Pecking Order and Credit Rationing Models were used to assess whether SMEs should consider outside or inside finance and again whether the ideal source of capital should be debt or equity. The research document introduced the demand side data set of the Pecking Order Model and supply side of Credit Rationing Model to fill this gap. The models were used as a benchmark in the analysis of quantitative data which were computed using the Statiscal Package for Social Sciences (SPSS) and qualitative data which were content analyzed. Quantitative data were collected from a sample of 113 respondents comprising of 60 SMEs from Gazaland Home Industry in Harare and 53 officials from purposively sample institutions that have been financing and/or providing capacity building to SMEs. The overall findings from the research study showed that dollarization and multicurrency system like other global financial crises affected SMEs financing specifically debt capital and as such SMEs have been surviving based on their ability to mobilize internal savings and new equity injections. The conclusion drawn and recommendations proffered point to the need for government and the central bank to explore venture capital as an alternative source of equity capital for SMEs financing.
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