Accelerating SME growth and access to capital and product markets.

Provision of financing without collateral as well as capacity building programs. A platform to efficiently exploit local and export markets and a collaborative effort to establish a secondary capital market for SME as a way of unlocking capital will be pursued. Ultimately, the solution will establish a global SME partnership.

About You

Organization: Youth Business Forum more ↓↑ hide↑ hide

About You

First Name

Simbarashe

Last Name

Mandeya

Website

Your Organization

Youth Business Forum

Country

Zimbabwe

About Your Organization

Organization Name

Youth Business Forum

Organization Website

Organization Phone

Organization Address

Suite 2, 1st Flr, Tembani Business center

Organization Country

Zimbabwe

Organization Type

Non-profit/NGO/Citizen-sector Organization

The information you provide here will be used to fill in any parts of your profile that have been left blank, such as interests, organization information, and website. No contact information will be made public. Please uncheck here if you do not want this to happen..

Your solution

read more↑ hide↑ hide

Name Your solution

Accelerating SME growth and access to capital and product markets.

Describe Your Solution

Provision of financing without collateral as well as capacity building programs. A platform to efficiently exploit local and export markets and a collaborative effort to establish a secondary capital market for SME as a way of unlocking capital will be pursued. Ultimately, the solution will establish a global SME partnership.

Country your work focuses on

Zimbabwe

If multiple countries, please list them here. If your solution targets an entire region, please select it below

Region(s) your solution focuses on:

Africa.

Range of turnover in your target firms, in USD

Less than $1 Million.

Average turnover in USD of your target firm

300 000.00

Number of employees in your target firms

5-24.

Average number of employees of your target firm

20

Specify the size, average and range of expected loans or investments in each target firm

Size : US$4m
Average : $20 000.00
Range : $10 000.00 - $100 000.00

What stage is your solution in?

Operating for less than a year

Innovation

read more↑ hide↑ hide

What makes your innovative solution unique?

The proposed solution is unique in that it is a multi-platform program designed to tackle most of the challenges facing SME’s especially those on the low end spectrum. The solution’s uniqueness is exemplified by having fingerprints on the marketing, access to capital and products and advocacy aspects of an enterprise. Some of the aspects to be addressed are inherent in the macroeconomic environment whilst some aspects are ingrained in the microeconomic milieu. In other words, the solution intends to address the bigger picture whilst providing a stimulus for the hindrance free development of SMEs.

The SME web directory is a marketing platform for cost effective access to product markets as well as registering their (SME) presence to investors. A company profile, key personnel as well as products and services will be included on the firm’s profile. The establishment of an SME fund without collateral is an innovative way of harnessing the flow of financing into SME whilst at the same time pursuing creative ways of risk management. The secondary capital market will seek to consolidate the gains of the Fund by providing very long term financing to firms ensuring sustainable growth and exploitation of economies scale. SME incubation will also be provided as way of providing cohesion amongst related industries essentially minimizing start-up and operational costs. Establish of WiSnet will ensure the accessibility of all things business through information dissemination and opening up of new avenues for the flow of capital by exposing potential business opportunities in growth regions

How does your proposed innovation leverage public intervention in catalyzing private SME finance?

The provision of public finance to the solution is a way proving the viability of equity financing as opposed to collateral when it comes to risk management. Of course financial institutions might argue that they will not be interested in being involved in the management of firms when it comes to equity financing as they will be confronted with a large portfolio companies. Through the provision of public finance to the solution, innovative ways will be explored on a test basis. For example, the stocks acquired through equity financing can be bundled up to create financial instruments like derivatives that can be bought or sold on the financial markets. This will act as an incentive for private finance to tap into equity financing as opposed to collateral. It is also important to note that that the 2008 financial crisis was based on mortgages which were being loaned out basing on collateral. The bundling of equity into derivatives has the potential to leverage public intervention in catalyzing private SME finance.

The establishment of a secondary capital market will also influence the flow of private SME finance into firms with potential. At the present, start up costs and market uncertainties act as a disincentive for private finance to flow into the institution. Questions like, “when will the first firm list and how attractive will be its stock?” come into the minds of providers of private finance. It is appreciable that investors have different classes, the speculators or short term investors who just want to capitalize on current or perceived gains and the long term investors. Generally long term investors look at rewards beyond five years and public finance generally has the objective of having such a vision. By guaranteeing the future, public finance will leverage the deployment of private SME finance tomorrow.

Institutions like WiSnet can be established using public finance. Once their sustainability is determined, they can be offloaded to the private sector to invest in their growth as well tapping into the diverse knowledge and expertise in the private sector.

Regulatory reforms on protection of intellectual property will relay heavily on public finance. It is appreciable that a society will benefit through a vibrant and robust intellectual property environment. Creativity and inventiveness will be promoted thereby contributing to the development of the arts, entertainment and inventive sectors. Clearly this demonstrates the leverage of public interventions in catalyzing private SME finance into the intellectual property milieu. Most artists in Africa – musicians and painters – fall into this category yet they have been bleeding heavily due to lack of a conducive intellectual property mechanism. A typical big corporation’s struggle with piracy is the battle between Microsoft and China.

What barriers does your proposed solution address?

Informality, Lack of collateral, Lack of SME access to skills / knowledge / markets, General barriers to SME development related to investment climate, Specific barriers to fragile and weak states.

If you checked any of these barriers, describe how your solution addresses them

In Zimbabwe, 70% of the SME’s can not do business with other registered firms, organizations and government due to informality. This informality translates into untapped markets and partnership opportunities. This is a result of the prohibitive regulatory framework. In Zimbabwe an entrepreneur has to go through 10 procedures and taking 96 days to register a company. Construction permits for a factory takes 1426 days after going through 19 procedures. Zimbabwe is also a high tax country further impeding on formalizing business. Cognizant of these shortcomings, the solution intends to advocate for business friendly regulatory framework in line with international best practices.

Collateral security has been the malady impeding on the growth of SMEs through lack of access to capital markets. In developing countries, the chief sources of substantial capital resources are financial institutions. The flow of Foreign Direct Investment in Africa is largely skewed towards established firms or resource and extractive related ventures with oil and minerals being chief among them. 60% of firms are established by entrepreneurs in their youthful years. By providing collateral free financing to SME’s, economic activity will be greatly enhanced. The risk of default can not be ignored. The solution intends to provide loans through equity financing. Once the entrepreneur has finished paying back his obligations, the financier exits the firm.

Cohesion between SMEs and trade bodies is somewhat disjointed with SME being unable to access information on market opportunities. With the underdeveloped communications infrastructure, information exchange between interested parties in commerce is burdensome. In this regard, the solution intends to provide a decentralized platform for the interaction of trade bodies, markets and service providers. A database of actors in each economic sector will be compiled and distributed to interested parties. This will enhance access to trade related information and exposing producers to markets. A website and web directory will be established as a platform to the global village. Ultimately, the solution intends to establish an independent SME institution for the purpose of facilitating cohesion amongst various stakeholders. This will be replicated in other countries. The national institutions will then network with each other creating a worldwide SME network dubbed ‘WiSnet’.

The economic crisis that bedeviled the Zimbabwean economy over the past years impacted negatively on companies. Some firms wound-up due to lack of strategic management skills with management of change being chief amongst them. Different economic shocks require different levels of skills so as to navigate through the crisis. In this respect the solution has identified various capacity building programs so as to management teams on the various skills required in managing crisis, change and growth

Impact

read more↑ hide↑ hide

Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

The solution is being implemented on a small scale in the province Mashonaland East, in Zimbabwe through an organization called Youth Business Forum. The organization was formed after identifying several challenges hindering the development of SME especially those managed by young entrepreneurs. Below is an outline of the current impact of the organization.

The organization has created a platform for young entrepreneurs to network with each other. This has enhanced the sharing of ideas and expertise and well as finding potential investors. The organization has a diverse portfolio of professionals ranging from business consultants, marketers, finance experts, lawyers, information technology experts, farmers and architects. This has enhanced the creation of synergies amongst entrepreneurs as well as marketing their services. The greatest advantage of such a platform is that it has the effect of outsourcing professional services at affordable fees. A entrepreneur in the manufacturing sector can simply talk to one of the lawyers for legal advice over a cup of coffee. The organization hosts several discussion forum and this also a platform for networking and sharing of ideas. To date, more than fifty entrepreneurs and enterprises have benefited from the platform. For example, a recently opened entertainment center, XS was linked with a manufacturer of sanitary detergents. It is also interesting to note that the graphic designing of the logo and promotional material was also done by a member of Youth Business Forum.

The organization is also involved in advocacy activities. This is essentially about identifying the various impediments hindering the development of SME’s. Relevant authorities will be engaged in terms of finding a possible solution to the impediments.
Another aspect of advocacy is the lobbying for youths to be included in national economic policy formulation. Over the years youths have been excluded from mainstream policy formulation yet they are going to be the leaders of tomorrow. The current constitution making process has seen the participation of youths although the volume could be better but we believe it is the starting point. The organization is also forming synergies with other youth bodies like Youth for Freedom in making their voice heard.

Access to capital and product markets is one of the major objectives of the organization. The organization is actively involved in lobbying for the relaxation of financing requirement from financial institutions. The need for collateral security has been identified as a major hindrance to the resuscitation of the economy. This has also culminated in the President of the organization entering the change makers’ challenge as a way of unlocking financial resources for the development of the SME sector.

How many firms do you expect to reach?

The solution will provide financing to 150 firms at an average loan of US20 000. Capacity building programs will target 50 firms per month over a period of one to two years. Advocacy will involve the participation of more than 100 firms depending on the topic to be deliberated on.

What is the volume of private SME finance you aim to catalyze?

The solution intends to catalyze US$1 million for SME financing which will be availed to firms on a revolving basis. The financing will be sourced chiefly from financial institutions

What time frame will be required to reach these targets?

SME financing will be expected to be implemented within one month after financing is secured. Capacity building programs are expected to kick off one to two months after releasing funds to firms. Advocacy activities will be ongoing depending on the business environment. Launching of WisNet pilot program is expected to take place after nine months after funds are released. The solutions provided will be on pilot basis with the expected end date being two years after the launch of programs.

Does your solution seek to have an impact on public policy?

Yes

What would prevent your solution from being a success?

Liquidity constraints currently bedeviling the Zimbabwean can potentially impact negatively on the full implementation of the pilot program. This is characterized by financial institutions offering short term financing with exorbitant interest rates (Zimbabwe adopted a multicurrency regime in 2009 as way of taming hyperinflation with the United States Dollar and South African Rand being the chief currencies used during trading).

Market distortions can also have a negative effect on the success of the proposal. Chief among these distortions is the foreign exchange market. In retail outlets and wholesalers, one United States dollar is equivalent to ten South African rands which is not reflective of the current exchange rate. This has been so since last year despite the rand firming against the dollar. Justification to this anomaly is that there are few coins in circulation making issue of change difficult. In most retail shops, most purchases are rounded up to the nearest 10th by buying small items like candy, lollipops and matches if their is no change

Describe the social impact of your innovation. Please include both numbers and stories as evidence of this impact

Gross Domestic Product will be anticipated to increase as a direct consequence of the implementation of the proposed solution. A projected modest contribution to GDP growth of 0.5-1% is expected for Zimbabwe. The figure will vary in other nations depending on the magnitude and diversity of the SME sector.

Ripple effects on other economic growth indicators will also be anticipated. Exponential growth of employment rate is anticipated as a direct consequence of injection of capital resources. The establishment of WiSnet will create more than 20 new job opportunities in each country. This will translate to approximately 300 jobs for the SADC region.

The implementation of the proposed solution will also b gender sensitive; actively pursuing the empowerment of women. Women constitute more than 50% of most countries populations yet they are the single largest group that has been marginalized in the society. Ideally, the solution will have a 60% bias towards empowerment of women.

Access to health services will also be improved. This will likely be triggered by the increase in disposable incomes.

Sustainability

read more↑ hide↑ hide

List all the funding sources that are required for the sustainability of this solution

PROGRAM FUNDING SOURCE AMOUNT $
SME CapitalFund 1. Developmental Financial institutions 4 000 000.00
2. Private Equity Firms 1 000 000.00
3. Local Financial Institutions 1 000 000.00

Capacity Building 1. Developmental Institutions 500 000.00
2. Non-Governmental Organization 100 000.00
3. Private Organizations 50 000.00

WiSnet 1. Trade Bodies 50 000.00
2. Private Enterprise 100 000.00
3. Developmental Institutions 1000 000.00

Advocacy 1. Private Enterprises 10 000.00
2. Non-Governmental Organizations 15 000.00
3. Trade Bodies 10 000.00
4. Developmental Institutions 20 000.00

TOTAL FUNDINNG REQUIRED 7 845 000.00

NOTE
Funding requirements are for the Zimbabwe pilot project

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

The proposed solution will offer fee based services. For example, when web directory is launched, firms will be paying fees towards the administration and maintenance of the sight so as to maintain perpetuity of the platform. Public finance will only be required as initial capital to cover various expenses that will be incurred in the setting-up of the platform. Consultations on the setting-up of the platform will take the majority of time, estimated to be three to four months for the pilot project. The actual web designing domain registration and hosting will be expected to take one to two months. All in all, this platform will be expected to graduate from public expenditure after six months.

Capacity Building programs will also be fee based so as to cover overhead costs like venue hire, audio visual equipment and stationary as well as fees for the trainers and presenters. Public finance will be required only for technical assistance and the hosting of the first program. Thereafter, the programs will be expected to be self sustainable. Post training cd’s, books and other presentations will be sold to those who were not able to attend the program or those who simply require their own copies for archiving. This will be an income generator for future program expenses.

Consultations with legislators in terms of reforming the regulatory framework will be done on a conference or forum basis. This will be an opportunity for established and up-coming companies to market their services. In essence, the costs of hosting of such symposiums will through sponsorships. Companies that sponsor the events will have the opportunity to advertise and distribute their promotional materials. This platform will not require public finance.

The establishment of a secondary capital market for SME will require a substantial input of public finance to cover first-loss capital. Extensive consultations will be required as well as substantial technical assistance. Ideally, all paperwork, regulatory framework as well as infrastructure and institutional set up is expected to be completed after one and half years. Thereafter, the market will become self sustainable just like any stock market.

At the present moment, it is quite difficult to estimate with a high degree of accuracy the timeframe it will take to graduate WiSnet from the reliance on public finance. This is due to the interconnected nature of the platform with regards to the sectors that it will target as well as the stakeholders who will be involved in the implementation of the solution especially on a global platform. A lot of protocols will have to be followed in different countries. The graduation and success of the solution will largely depend on the input of international bodies in terms of coordinating and providing expert knowledge on the ideal implementation criteria of the solution.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

Private funding will be required for the initial start-up funding. The solution essentially requires a hybrid of public and private financing in the proportions of 90% and 10% respectively. Any loss of private funding will be cushioned by the input of the beneficiaries of the proposed solution. As mentioned in the response to question 19, services offered by the solution will be fee based thus ensuring sustainability of programs once they have been launched.

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

Implementation of the proposed solution will include various stakeholders that are involved in the promotion of the development of the private sector with emphasis on SME.

National actors will generally include the chambers of commerce and industry and trade bodies. Chambers of commerce and industry will provide expect advice in terms of implementation of solutions as well as engaging in advocacy. Trade bodies will provide information on markets as well as the status of the various industries in a nation. NGO’s will provide independent advice and evaluations on solutions as well as their implementation.

Regional and international actors will involve COMESA, SADC, the World Bank and IFC. These actors will provide technical assistance and oversight of the solution.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

The major factor that can potentially impede on the sustainability of the proposed solution is the politicization of developmental interventions especially in Zimbabwe. Over the past years Non Governmental Organizations’ and donor activities where hampered by interventions of the government. Prior to 2009 and the formation of the Inclusive Government, most NGO operations were almost non-existent. However, the Inclusive Government has brought some normalization to the operations of NGO’s. The solution implementers will endeavor to continuously engage the government and all interested parties in the implementation of proposed solutions.

Poor investor confidence is another disease that can hinder the sustainability of the proposed solution especially in Sub-Saharan Africa. This is exemplified by the poor flow of Foreign Direct Investment in the region. This can be partly attributed to the not so investor friendly regulatory framework. The Indigenization and Economic Empowerment law that is being enacted in Zimbabwe has impacted negatively on the flow of FDI at a time when the nation is prioritizing long term investment.

Legislators in Zimbabwe have also had the tendency to overlook innovative ideas in the name of ‘national interest’. The Finance Minister advocated for the granting of security of tenure for farmers reallocated so that they (farmers) can use the security to source financing from banks. Members of the opposition party heckled him without considering the impact of such an idea on the development of the economy.

Africa has been riddled with a poor communications infrastructure which can also hinder the access and flow information from developed countries to developing countries.

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

The proposed solution intends expand immediately to other sectors as well as scaling up within each sector. Initial sectors are agriculture, tourism, agro-processing and manufacturing, services and finance. Generally, Africa has a comparative advantage in agriculture and mining therefore the solution intends to exploit this advantage by having a bias towards these sectors.

The solution intends to springboard from the advantages that have been exploited by Youth Business Forum so as to further expand the solution into other provinces. Once the local Zimbabwe market has been exploited, the solution will expand into the southern African region later on expanding into the Sub-Saharan Africa region ultimately growing to encompass the global SME market.

188 weeks ago Bahiyah Yasmeen Robinson said: Overall, I feel this proposal is well outlined and explained. I am wondering if you could further explain the WisNet concept and tie it ... about this Competition Entry. - read more >
188 weeks ago Simbarashe Mandeya updated this Competition Entry.
188 weeks ago Simbarashe Mandeya submitted this idea.