Unlocking rural entrepreneurship access to microfinance services in Zimbabwe- the moderating role of business performance

Abstract

Informed by the huge financed gap for Micro, small and medium enterprises (MSMEs, this study aims to identify the extent of intensity and significance of constraints to rural Micro, Small and Medium Enterprises (MSMEs) in accessing funding from microfinance institutions in Zimbabwe. The paper further explores potential avenues of unlocking rural MSME access to microfinancing. This study uses path modelling to investigate key demand side obstacles by rural MSMEs in accessing microfinance funding in the rural Matabeleland region of Zimbabwe and adopts a questionnaire based survey design targeting 301 rural micro entrepreneurs. The study shows that financial skills and knowledge, access to markets and technical skills are the main impediments to rural entrepreneurial access to microfinancing, however these predictors have more influence on rural entrepreneurial access to microfinancing when mediated by business performance. For successful sustainable poverty alleviation and employment creation for the bottom of the pyramid leveraging on a vibrant rural MSME sector, there is need for direct policy interventions to advance the financial literacy, financial management and technical skills for rural MSMEs as well as mechanisms to assist the MSMEs in securing markets. This paper makes significant contributions to the discourse of rural microenterprise financing debate by identifying significant constraints.