In an effort to bridge the funding gap of SMEs, the country’s first Alternative Trading Platform (ATP), Financial Securities Exchange (FINSEC), launched the Growth Enterprises Market (GEM) Portal. The GEM Portal is a dedicated online Portal designed for micro, small and medium enterprises (SMEs) in need of raising capital for retooling operations, increase productivity, or to increase their product range and or to expand into diversified markets.
It is a simplified yet innovate use of technology for MSMEs to apply for equity or debt financing, and be exposed to financiers and advisors. The GEM Portal technology is not only 100% home grown, as it is developed and maintained by Escrow Systems, a company within the Escrow Group, but also competitive on the global front. SMEs can apply through the GEM Portal to raise capital in an efficient, convenient and cost-effective manner that ensures sustainability of the enterprises.
The GEM Portal seeks to assist SMEs to access affordable funding, or “patient capital” that is different from the bank loans that are expensive and short term.
Those enterprises that qualify for listing will be listed on the FINSEC Exchange; thereby demystifying the notion that the stock exchange is the preserve for blue chip companies.
Benefits to Stakeholders
The GEM Portal is designed to make it easy and cost effective for all the participants in the listing and/or funding value chain. The Portal seeks to promote financial inclusion as well as deepen the capital and financial markets by enabling easier access to the capital markets by a broader range of issuers and investors.
- The GEM Portal enables prospective SMEs to complete an online application for raising capital through either equity listing on the FINSEC Exchange or through debt financing by investors.
- The interactive online form has an in-built comprehensive scoring and rating mechanism of each input by the applicant, indicating to the applicant how well they are doing and the prospects of their application.
- Applications that meet the predefined minimum score will be exposed to various providers of capital.
- Some applications may opt for listing on the FINSEC Exchange and these will have additional benefits such as:
- (a) Enhancing liquidity of the counter as well as significant and positive increase in the value of the business as reflected by the share price. o
- (b) Broader shareholder base and reduced concentration risk.
- (c) Enhanced the brand equity of the issuer and a boost of the company’s prestige by having its shares listed on a recognised and regulated securities exchange.
- (d) Enhanced corporate governance structures, which have the capacity to attract diverse skills necessary for the sustainable growth of the business.
To Underwriters/ Financiers
- Investors will have access to a directory of investment grade SMEs that have undergone pre-assessment on the GEM Portal.
- Investors will be able to choose SMEs to invest in based on their internal investment criterion thereby saving time from considering tonnes of applications.
- Having the investee company listed and trading on an exchange exposes the holders of the listed securities/ instruments to an efficient price discovery mechanism to determine a market price of their investment based on market fundamentals.
- Listing provides an efficient exit mechanism for the investors when they want to dispose of the investment.
- Provides an efficient and commercially viable and sustainable avenue for increased corporate social responsibility.
To Capital & Financial Markets
- Broadens and deepens the market by increasing the number of issuers, investors, borrowers and lenders that are actively and profitably participating. Through ease of access using technology and the internet, the GEM Portal will extend its reach to all provinces across the country.
- Strengthens corporate governance structures within the economy by having more firms formalised and structured in order to meet requirements of lenders and investors as well meeting ongoing scrutiny by shareholders and regulators.
- Promotes empowerment and development of local entities by being a conduit for raising capital.
There is an estimated 3 million MSMEs operating in Zimbabwe and employing an excess of 5.7 million people (75% of the total workforce in the country). Out of these 3 million SMEs, only 15% are formally registered and or licensed while the rest remain in the ‘informal’ sector. These enterprises contribute approximately 50% of the country’s Gross Domestic Product and although they make up to 70% of the registered corporate tax payers, the contribution of tax revenue from SMEs is only just over 20%. The launch of this solution will encourage the remaining informal SMEs to regularize their operations, so as to benefit from the prospects of debt funding or capital raising.
As SMEs grow, they will contribute to the national economy through the positive impact on employment creation, which is directly related to poverty alleviation, growth in Gross Domestic Product and increased fiscal revenues. For developing countries such as Zimbabwe that still rely on importation of most basic goods and services, development of SMEs will not only increase the export potential of the country thereby generating additional and much needed foreign currency, but will also play a key role in import substitution that will save foreign currency and enable the country to redirect the foreign currency to the productive sectors.