Micro-Enterprise Financing

By Loyd Kazunga

Micro-Enterprise Financing explores and answers the elusive question: How do we realistically finance micro, small and emerging businesses? This question does not require a speculative response, but a practical reply. The need to support micro and innovative emerging businesses is growing. Presented in rudimentary terms, this book takes the reader through very practical, yet pragmatic approaches to resource mobilisation, as well as funding approaches to small and emerging enterprises.
About the author
Loyd Kazunga is an experienced financial practitioner who holds an MSc Degree in Finance and Investment, B.Com Finance, Diploma in Banking and a Certificate in University Teaching. He has several years’ experience in corporate finance and banking, investment analysis and business strategy advisory, having worked for several financial and non-financial institutions. He has also worked as a business consultant focusing on strategy and corporate turnaround. He has lectured at several universities in MSC and MBA programmes and is also a professional programmes’ examiner.

• Language: English
• Publisher: Loyd Kazunga
• Release date: Apr 13, 2017
• ISBN: 9780797475571

Book preview

Micro-Enterprise Financing

Micro-Enterprise Financing

LOYD KAZUNGA

Copyright © 2016 Loyd Kazunga

First edition 2016

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage or retrieval system without permission from the copyright holder.

The Author has made every effort to trace and acknowledge sources/resources/individuals. In the event that any images/information have been incorrectly attributed or credited, the Author will be pleased to rectify these omissions at the earliest opportunity.

Published by Author using Reach Publishers’ services,

P O Box 1384, Wandsbeck, South Africa, 3631

Printed and bound by Novus Print Solutions

Edited by Bronwen Bickerton for Reach Publishers

Cover designed by Reach Publishers

Website: www.reachpublishers.co.za

E-mail: [e-mail]

Contents

Dedication

Acknowledgement

Abbreviations

Foreword

Introduction

Streetwise Business Planning

Broad Types of Finance

Financing through Personal Savings

Community and Group Savings Clubs

Asset Liquidation

Funding from Close Associates

Vendor and Customer Financing

Strategic Partnerships and Angel Financing

Micro-Finance Loans

Bank Micro-Enterprise Loans

Venture Capital and Private Equity

Online Financing Methods

Grants and Subsidised Funding

Faith-Guided Financing

Conclusion

Dedication

I dedicate this book to The Almighty who has given me the opportunity, the privilege and the power to live. Truly he has got the whole world in His hands! My wife, Pretty, my two sons, Masimba and Panashe, and my daughter, Tinotenda, should also take pride and joy in this privilege that we have been given by the Lord to live. We are not mere mortal beings; we live for a purpose. I dedicate this book on behalf of my family to the One who has given us Joy, The Lord!

Acknowledgements

I would like to acknowledge the various sources that have buttressed this book including the various online sources and individuals who are mentioned and acknowledged within the text, in footnotes, as references and bibliography at the end of the book. Essentially, this book builds on the foundation of work that has been done by the various esteemed practitioners, scholars and writers. I would also like to acknowledge the invaluable input of the following individuals who helped shape the book in one way or the other, these include Mr R. Sibanda, who helped in shaping the chapter on group savings schemes, Mr K. Ahadzi for his invaluable input on group savings and investment schemes in East Africa and a review of the manuscript, Mr Z. Derera for providing scholarly references on faith guided funding, Mr N. Kalinchenga for reviewing and giving an opinion on the faith guided funding and Pastor I. Mavhiza for his opinions on various sections of the book.

I would also like to acknowledge my spiritual mentor, Rev T. Rusere for his motivation and inspiration, and this book is one of the results of the words of encouragement and inspiration. Lastly but not least I would like to appreciate the advice, opinions and words of encouragement from my various friends and colleagues who include Wilchig and Mr Chris Tenga, the CEO of Allaboard Africa, who agreed to write a foreword for this book.

Abbreviations

AECF: Africa Enterprise Challenge Fund

ASCAs: Accumulated Savings and Credit Associations

DFI: Development Finance Institution

DNA: Deoxyribonucleic acid

FIVE Cs: Character, Collateral, Capacity, Capital, Conditions

IPO: Initial Public Offer

JSE: Johannesburg Stock Exchange

MFI: Micro-Finance Institution

MSME: Micro Small and Medium Enterprise

NGO: Non-Governmental Organisation

OPM: Other People’s Money

OTT: Over the Top

PESTL: Political Economic Social Technological and Legal

PUTs: Property Unit Trusts

RBZ: Reserve Bank of Zimbabwe

ROE: Return on Equity

ROSCAs: Rotating Savings and Credit Associations

SA: South Africa

SMEs: Small and Medium Enterprises

SMS: Short Message Service

SNV: Stichting Nederlandse Vrijwilligers (Foundation of Netherlands Volunteers)

SWOT: Strengths, Weaknesses, Opportunities and Threats

US$: United States Dollar

VAT: Value Added Tax

VCCZ: Venture Capital Company of Zimbabwe

VUCA: Volatile, Uncertain, Complex and Ambiguous

ZEEM: Zimbabwe Emerging Enterprise Market

ZSE: Zimbabwe Stock Exchange

Foreword

It is my pleasure to introduce this book whose ideas and insights have come at a time when most emerging economies are trying to find inclusive, participatory and sustainable models of financing promising entrepreneurial ideas at MSME level. Significant investment has been ploughed into developing the MSME segment in emerging economies. Focused government departments and agencies dedicated to MSME development have been formed. Economic planning policies are increasingly being aligned to MSME sector development in most countries. Providers of global aid have ‘tucked’ into the MSME development agenda as a bankable model of mobilizing financing for beneficiary countries and communities. Even secondary and tertiary education providers are transforming their curricula, introducing entrepreneurship courses and programmes at various levels of academic and professional study. Most recently, regulators of financial services have begun to compel their constituent players to develop and mainstream policies and strategies with a financial inclusion outlook. These are a few ‘applaudable’ examples of investments and strides being made towards MSME development by various stakeholder institutions. However, notwithstanding the significant investments and efforts deployed towards the MSMEs, there remain ‘telling’ knowledge gaps on the sustainable management of MSMEs, and their transformation into established business ventures with a stronger competitive footing and secure going concern prospects. This book by Loyd titled Micro-Enterprise Financing brings a very important contribution to the MSME development agenda by tackling the heart and soul of sustainable MSME development - practical financing interventions!

What is it that makes this book a ‘must-read’ for MSME promoters, development agencies, policy makers, providers of enterprise financing, scholars and MSME consultants? In this book, Loyd has managed to simplify the idea of business financing by profiling the vast endogenous, conventional and emerging micro-enterprise financing methods at the disposal of anyone with a great business idea and a compelling vision underlying that idea. What is radically refreshing about this book is its underlying theme of mainstreaming a savings-driven funding culture that leverages on the demographic attributes of most societies and economies - sheer population numbers and deep-running relationships at community and household levels, to provide ‘financing without shackling’. This ability to tap into relational networks, social values, community capital, and spiritual affiliations presents new opportunities for enterprise financing that can enable emerging financing models such as crowd-funding. Probably the most important and often elusive idea that Loyd cultivates in the book is that great business ideation always finds financiers, whether these financiers are at household, social network, spiritual circle or traditional institutional level. This perspective corrects the commonly held notion that the money problem is the biggest problem when it comes to starting a micro-enterprise or transforming an MSME into an established enterprise. Even though this book is on micro-enterprise financing, I enjoyed the argument that of first and foremost importance is a good business concept and the DNA of success embedded in the business idea. If starting a business is taught as a