HARNESSING RESOURCES FROM THE INFORMAL SECTOR FOR ECONOMIC DEVELOPMENT

Dube, Cornelius and Sanderson, Abel (2014) HARNESSING RESOURCES FROM THE INFORMAL SECTOR FOR ECONOMIC DEVELOPMENT. Working Paper. UNSPECIFIED, Harare.

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Abstract

The operating environment in Zimbabwe, since the adoption of multicurrency system has been characterized by a number of challenges. These include the rapid deterioration in external sector position on account of growing import dependence against a background of poor export performance; subdued foreign capital inflows; an external debt burden; frequent power outages on the back of progressive deterioration in generation infrastructure; a limited fiscal space, low domestic output and de industrialization; and slow savings and money supply growth and a growing non-performing loan problem in the banking sector. These factors have all contributed to worsening the liquidity problem in the banking sector hence the inability of banks to continue to underwrite business. Further, the economy has also undergone significant structural transformation in the past decade, which has seen the formal sector being replaced by a growing informal sector. This transformation of the economy towards informalisation implies that the traditional business models cannot continue to be applied hence the need to adopt new mechanisms that are best able to serve the emerging class of business clientele. The Bankers Association of Zimbabwe in their quest to address the challenges and the exploit opportunities brought about by the new economic structure, proactively undertook this study to ascertain how the informal sector can contribute to economic development through the formal banking channels. This was achieved through unpacking the challenges faced by the players in the informal sector; reviewing the business development models being used by the informal sector; understanding the relationship challenges between the informal sector and the banking sector; and proffering alternative models of financial inclusion that can be adopted to tap into the resources circulating outside the banking system. This research study was conducted in partnership with the Zimbabwe Economic Policy Analysis and Research Unit-ZEPARU, an organization whose research expertise is well respected in Zimbabwe and in the region. This study is therefore motivated by the desire to bring the informal sector under the ambit of the banking. This route has been mooted in an effort to harness the resources that are currently circulating outside the banking sector and mostly resident in the informal sector. The underlying premise is that once these resources are properly harnessed, the total resources available for financing productive endeavours will increase, hence contributing positively to economic growth.

Item Type: Monograph (Working Paper)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Divisions: Research Units > Research Centre
Depositing User: Mr Cornelius Dube
Date Deposited: 29 Dec 2015 07:03
Last Modified: 29 Dec 2015 07:03
URI: http://researchdatabase.ac.zw/id/eprint/1673

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