The growth and adoption of mobile money in Africa has led to a broadening of the mind in financial innovation. The rate of change in the financial services sphere is traditionally slow but with the aid of technology and customer demand the time it takes to adopt new innovations in financial services has been reduced.
In Zimbabwe it is estimated that small to medium sized enterprises (SMEs) make up approximately 40% of GDP and yet most of these businesses struggle to access financing. A recent Zimbabwe Finance Ministry survey reveals that only 30% of SMEs interviewed who had applied for funding were able to access bank financing, albeit at prohibitive interest rates.
Enter Harare Receivables Exchange (“HRE”). This company has leveraged technology and financial services to give SMEs an alternative to the usual financing avenues. HRE gives companies direct access to much needed capital for their businesses. This innovation is a necessary addition to the African financial
HRE enables businesses to harness their cash flows and utilize them more effectively. Companies effectively trade the debt on their books for cash. This is conducted using an online auction platform, ensuring that HRE’s clients get a market determined price for their debt. The cost of funding and the time required to access the funds is considerably reduced. “Our mission is to provide a secure, transparent and efficient trading environment” says Takudzwa Chinhengo CEO of Harare Receivables Exchange.
The financial landscape needs to be diverse in nature and allow people to choose the best method of solving their financing needs. The entry of this new option reduces the cash conversion cycle of many businesses and allows for credit to be accepted more readily in the knowledge that once granted, the debt may be sold before maturity at a discount to willing buyers.
Many businesses suffer from cash flow constraints that stop them from supplying new clients, supplying large orders, paying salaries, purchasing new equipment and so on. The frustrating part of this is, that in many cases, the business is generating sales but unable to carry out certain operational functions because money is held up with debtors. HRE’s innovative trading platform allows these businesses to access their money before payment is effected by debtors.
The future of Africa is bright and the use of innovations in the financial sector will engage a larger part of the economy and result in Africa growing at a faster rate.