Global Journal of Management and Business Research, C: Finance, Volume 22 Issue 4

through the banks and micro-finance institutions. It is of interest to note that where Small and Medium Enterprises Development Corporation (SMEDCO) has significantly reduced the collateral demands, the government aided institutions such as the banking sector administering the facilities, are guided by policies, including complying with tax regimes. The 200% interest rate on bank loans was universally applied in 2022, meaning that the banks had to comply as per the monetary authority requirements, which further affect the costs of funds and impact negatively on the operations of the SMEs. Collateral security if not looked at critically, affects access SMEs financing and generally slows the growth of this sector which has been resilient in times of economic turmoil. Basically, the problems in accessing finance and its attendant costs implications among SMEs and mandatory requirement of collateral remains a thorn in the flesh of many businesses outside the SMEs, and the consequences have been slow growth economically. Indisputably, demand for collateral security from SMEs owners makes part of their assets committed to the financier or to a lending institution, which again increases exposure of the assets especially when the VUCA environment persists – particularly sudden change in policies that characterise the Zimbabwean environment. As a general practice the assets become part and integral security for debt payment or re-payment without which, most commercial financial entities do not support disbursement of loans to any business (Gitman et al., 2015). Thus, if the business owner fails to pay, the institution recovers its money by possessing that asset, which has been used to secure the loan. Fundamentally, the security assets should be used to recover the principal SMEs loan in case of default or complete failure to pay the money. As such, many African countries including Zimbabwe, have had the SMEs in particular, struggling in the face of obtaining collateral security where it is required to be provided as to access loans especially in the form of properties such as houses, business building, movable assets such as car4s, and anything that could actually bring back the principal loan recoverable in terms of value in the case the borrower fails to pay or defaults on loans (Garrett, 2009). Security for loans must actually be capable of being sold under normal conditions of the market, at a fair market value and also with reasonable promptness. However, in most financial institutions, public or private, collateral is set as a precondition for SMEs in order to accept their proposals. There is a strong belief that the assets should be 100 % owned by the borrower and have the value equal to the amount being applied for which is usually difficult to achieve especially where the borrower is a start-up (Mullei & Bokea, 1999). Evidence on the ground indicate that most of the start-ups in Zimbabwe, do not have such assets with the value for the loans they need. While the intension is to safeguard lenders is justifiable, the risk increases where the borrower may appropriate the loan and not commit it for business – of which collateral requirements, when in place, reduce negative consequences and risk exposure of the lenders against improper utilization of the funds by SMEs. It remains of great interest to understand that the dynamic environment in Zimbabwean affect SMEs, and to a larger extent, these complexities deny and discriminated small businesses the opportunity to contribute in the economy. The central critique is that because of high risk perception over the SMEs in Zimbabwe, the perceivable and conceivable degree of exposure and failure of the businesses, need to be understood so that it informs the amount of loan support that can be rendered to any SMEs. Ideally, the resource are scarce in the banks that are financed by the government. Many of them, are not fully capitalised, which makes it difficult to operate against the backdrop of huge capital requirements from SMEs who want to start their businesses. Essentially, there has to be some form of revolving fund that should operate in a fashion to enable adequacy of resourcing lending capital to SMEs with limited or not collateral requirements (Kihimbo et al. 2012). Thus, collateral security demands for SMEs loans in Zimbabwe impacts on the growth and transformation of sector in the country. V. SME s A dvisory and S upport S ervices One of the most important aspect in terms of SMEs financing is to identify the factors that influence financial inclusion among SMEs. This relates to the kind of advice and support services that the SMEs ought to have access to from the financial institutions that are given the mandate to offer the funds to SMEs, and these have to be included in the target population of the study. Based on this independent variable of advisory and support services, it will be important to understand the success rate by SMEs to access funds. Some of their business proposals are turned away simply because they are ill-advised and such support services are key to ensure that those with a brilliant business ideas, can be assisted for better packaging and creating a sound business portfolio that is bankable and implementable. It has to be noted that governments all over the world have designed a number of support services for SMEs to help the sector grow and these should benefit the SMEs entrepreneurs. These include various facilities that include policy initiatives and support programmes for the sole purpose of creating an enabling environment and developing the SME sector to contribute to economic growth and development. Thus, business advisory and support services is inescapably integral to Taxonomy of Small and Medium Enterprises (SMEs) Constraints: An analytical Perspective of Zimbabwe Global Journal of Management and Business Research Volume XXII Issue IV Version I Year 2022 ( ) C © 2022 Global Journals 4