The Sunday Mail
AT a time when banks and other financial institutions have elected to “blacklist” small and medium-scale enterprises on the pretext that they do not repay loans, statistics from the Small Enterprise Development Corporation (Sedco) actually indicate that their payment history is satisfactory, with 90 percent of the loans disbursed by the statutory body having been repaid.
Sedco is a development finance institution created to promote and develop SMEs in 1983 through an Act of Parliament and falls under the Ministry of Small and Medium Enterprises and Co-operative Development.
Barclays Bank, which recently mobilised more than US$100 million in lines of credit, intimated that it might decide to deliberately sideline SMEs and individual borrowers and chose to extend financial support to “quality borrowers” only.
Sedco, however, seems to be faring better.
Though repayments from borrowers have been good, Sedco hasn’t been properly resourced over the years to support the growing appetite for credit.
About US$3,9 million has been injected into the corporation in the past five years, against estimated annual requirements of no less than US$10 million.
Sedco general manager Ms Gladys Kanyongo said last week that despite the headwinds buffeting the economy, only 10 percent of the US$8 million disbursed was yet to be repaid.
“The SMEs have not been spared by the challenges facing other businesses in the economy, and we have some of our clients who have difficulties in servicing their loans.
“Total loans granted to SMEs since 2009 to (the) period ending 30 June 2014 amount to US$8 160 000.
“The collection rate is about 90 percent with other +/-10 percent showing the signs of distress,” said Ms Kanyongo.
Debtors have been engaged and outstanding dues rescheduled.
Sedco says since January 2014, about 750 inquiries had been made at the corporation’s offices countrywide.
Ms Kanyongo added: “(But) due to limited funding, the corporation has managed to assist 172 SMEs with loans amounting to US$300 000 only.”
In the 2014 National Budget, Finance and Economic Development Minister Patrick Chinamasa proposed to allocate US$4,4 million to Sedco. It could not be established at the time of writing if the money had been disbursed.
Some analysts suggest Government is reluctant to put more into Sedco due to system laxities that have allowed alleged fraud by top management.
Two audit reports have indicated the possibility of corruption, fraud, corporate governance violations and financial mismanagement at the money-lender.
It is alleged that about US$3,5 million was looted by officials from 2009 to 2011.
Ms Kanyongo confirmed that past managers had mishandled funds.
“The amount involved is US$788 946 due to fraud by some of the unscrupulous former staff members who took advantage of the weak internal control environment.
“Exhaustive audits were carried out that resulted in the dismissal of those involved, reports were made to the authorities and the criminal cases are before the courts.
“Unfortunately no recoveries have been made to date despite the (fact that) efforts to recover that are being pursued . . . In addition, the corporation is also subject to external audits.
“The developments to ensure that loss due to similar activities as well as other risks have been communicated to our parent ministry and (the) Ministry of Finance.
“I would like to believe that Government is willing to support access to finance by SMEs through Sedco barring other factors.
“The corporate governance deficits were more or less in the weak control systems and some staff lacking in integrity, professionalism and ethics have since been addressed.
“The corporation has had a full board which directed management to fully investigate the fraudulent activities and remedial course of action,” said Ms Kanyongo.
She said Sedco had strengthened its internal controls by establishing strong audit and loss control teams and systems, among other measures. The difficult trading environment obtaining in the country has seen non-performing loans skyrocketing since adoption of multiple currencies in 2009.
As at December 31 2013, non-performing loans in the country stood at 15,9 percent, way above the 5 percent international benchmark.
Market watchers forecast that non-performing loans could spike from the current 10,8 percent to 20 percent by year-end.
For example, youths who benefitted from the Kurera/Ukondla Youth Fund have failed to repay about 70 percent of the US$5,6 million disbursed as at April 2014.
