SourcesofFunds


Sources of Capital Finance

In the next few postings we will discuss the sources of funds to fund your business ideas. I will use case studies from Zimbabwean banking entrepreneurs. The entrepreneurial bankers used different sources of finance to build up their capital structure. Here I discuss the methods used and alternatives that could have been explored. Although entrepreneurial literature generally focuses on initial capital only, this discussion considers capital financing strategies for the whole business cycle. This is critical because most banking institutions found their capital continuously eroded by inflation and hence needed continuous recapitalisation.

Personal Resources

It is expected by most lenders and investors that the entrepreneur would risk part of his own resources to assure them of his belief in the venture. In Royal Bank, Jeff Mzwimbi and his partners used their own personal resources as start- up capital. For the long term capital requirements Mzwimbi offered his equity in Econet as collateral for a loan from Intermarket Discount House. Within Kingdom Bank, Nigel Chanakira and his partners used their own resources, with Nigel disposing of his family home while others, e.g. Franky Kufa, used proceeds from a profit share scheme from their previous employer.

A common form of using personal resources is bootstrapping. Bootstrapping is a way of starting up the venture using meagre personal resources to demonstrate that the business idea works and to generate internal sources of equity. Some bankers used this approach.

They started as advisory services which, after a few years of acquiring credibility and earnings, were converted into merchant banks. Advisory services require minimum staffing and no regulatory minimum capital requirements. Kingdom Bank, Trust Bank and ReNaissance Merchant Bank all used this approach. A few years later, Kingdom and Trust converted from merchant banks to commercial banks. The capital requirements for merchant banks are lower than those of commercial banks.

ReNaissance Merchant Bank traded itself into significant equity capital in 2006 when the minimum capital requirements were increased. A number of banks resorted to rights issues from the shareholders. However RMB shrewdly took positions on a new money market instrument released by the Central Bank, the inflation-linked Open Market Operations Treasury Bill. This yielded excellent results leading to the bank meeting the capital requirements without resorting to shareholder funds.

Placing your own resources even if they are little into the business convinces others on your confidence in the business idea. I am amazed at the may people who try to raise funds from others without even an initial seed capital. Why would investors risk their moneys on a project you have no intention to risk your own resources. Sometimes using personal resources helps you demonstrate the model and how it works before you invite others into the business. Go ahead and start the process.

EquityFinance


Equity Financing

Equity financing is a financial strategy of selling a portion of the ownership (equity) of the entrepreneurial venture to investors to whom partial ownership of the company is conveyed and dividends may be paid out at the company’s discretion. These investors exercise partial control on the strategic direction of the organisation.

This can be divided into internal (as directors’ loans or from family and friends) and external equity. Since creditors are entitled to repayment before equity holders in the event of liquidation, equity investors assume a higher risk than debt financiers. Consequently they expect higher returns as well.

Sources of equity financing for entrepreneurial bankers included the entrepreneur’s friends and family, private investors, employees, venture capital firms, investment banking firms, and institutional investors (insurance companies, large corporations, and government-backed organisations e.g. NSSA, SEDCO[1] and IDC[2]). Venture capital firms were viewed as being too controlling and too conservative in their approach.

Strategic alliances with institutional investors, whereby the investor acquired huge equity, proved useful to entrepreneurial bankers in a number of ways. Kingdom Bank gave up a major stake of its equity (25%) to Meikles Africa. This provided Kingdom with an opportunity to establish in-store banking in all Meikles brand stores and led to the establishment of a financing arrangement through Meikles Financial Services which offers credit to Meikles Africa’s customers. This strategic alliance also increased the liquidity position of Kingdom Bank in the turbulent years (2003-2004) due to its ability to mobilise deposits from the TM supermarkets. In fact at the height of the cash crisis, Kingdom gained market share as it was able to mobilise huge deposits from the supermarkets after a directive from Meikles’ Head Office instructed all Meikles’ subsidiaries to deposit their revenue with Kingdom Bank. Similarly Century Bank established a strategic alliance with OK Supermarkets which allowed it to establish similar in-store banking outlets in exchange for equity holding.

In 2004, when entrepreneurial banks were under siege, Kingdom Bank established another strategic alliance whereby Econet Wireless acquired a significant stake (10%) in the bank. This was a vote of confidence in the bank as well as a source of critical deposits. During a rights issue which took place in January 2005, both Econet and Meikles Africa followed their rights and also increased their stakes. It is therefore evident that these strategic alliances also serve as cheap sources of finance through recapitalisation by equity holders.

Advantages of Equity Finance

The main advantage is that equity finance, in contrast with debt finance, is easily accessible at both the concept and early stages of the business. A significant number of banks were able to obtain commitments to equity uptake well before the licensing of their banks. However this changed when the new banking regulations required that funding be available before the RBZ granted the license. This is why banks which were formed after 1998 had challenges in raising equity finance. Examples are Royal Bank and RFHL which, unlike those who went before them, could not access this source of funds.

The investors sometimes become good sources of counsel, contacts and credibility. For example most entrepreneurial bankers in Zimbabwe sought Old Mutual, First Mutual and NSSA as investors as these gave credibility to their ventures. Nigel Chanakira had counsel and support from both Strive Masiyiwa and Meikles Group CEO who were significant investors in KFHL. In fact in 2006 these seem to have successfully lobbied the regulators to allow Chanakira to return as an executive director and Group CEO of Kingdom Financial Holdings.

Another advantage of equity financing is that there are no obligations to monthly repayments at the critical early stage when cash flow is constrained. In times of critical resource shortage dividends can be deferred in an effort to conserve capital. This strategy was manifest during the years 2004-6 when most banks deferred dividend pay-outs. In contrast debt repayments would still have been due irrespective of cash flow problems.

Equity financing implies sharing the risk of the venture rather than absorbing all the risks. This enables the entrepreneur to reduce the amount of his own resources placed at risk. It also means sharing the profits.

Equity finance is well adapted for an uncertain world like Zimbabwe.

Disadvantages of Equity Finance

The entrepreneur gives up a measure of control as well as the sole right to chart the strategic direction of the organisation. Differences of opinion concerning the strategy may cause conflicts among shareholders. In Century Bank the founding MD, Jefta Mugweni, was ousted by his major equity partner and deputy after a dispute on strategy.

Similarly William Nyemba, the founding CEO for NMB, was ousted by his deputy and major shareholder Julias Makoni after differences of opinion on strategic direction and levels of acceptable risk. In the event that initial public offerings are used as sources of funds, these prove to be complex and expensive to administer. As many bankers discovered a public listing provides cheap sources of cash but also increase the level of regulatory controls to which they are subjected.


[1] SEDCO- Small Enterprises Development Corporation

[2] IDC- Industrial Development Corporation

DebtFinancing


Debt Financing

Debt financing is a strategy by which the entrepreneur borrows funds from either a lender or investor, which would be repaid in future with possible interest charges. The major kinds of debt financing available to entrepreneurs are regular loans, private placement of bonds, convertible debentures, leasing arrangements, debt factoring, soft loans, public sector loans and various forms of trade credit.

Debt factoring frees up cash on a timely basis by purchasing the entrepreneurial firm’s accounts receivable. Rather than waiting for customers to pay invoices, the business receives immediate payment for sales. This is provided either as recourse financing, in which the business is ultimately responsible if its customers do not pay, or non-recourse financing, in which the factor company carries the risk. This is only viable for businesses with accounts receivable and therefore may no t have been useful for entrepreneurial bankers.

A company can improve its cashflow by leasing various types of equipment from a leasing company, instead of making large capital investments in purchases. Equipment leases usually involve only a small monthly payment, while enabling the business to upgrade its equipment quickly and easily. Entrepreneurial bankers could have leased high technology equipment like ATMs and IT systems. Unfortunately vendors in Zimbabwe could not support this and foreign based ones were cautious because of the country’s perceived high risk due to foreign currency shortages and political instability.

Royal Bank was initially capitalised through debt financing supported by one of the founders’ shareholding equity in the fast growing telecommunication company, Econet. Because of the new regulations, and probably due to the founding entrepreneurs’ desire to retain control, they could not access sufficient equity financing.

The decision to use debt financing is affected by prevailing conditions concerning taxation levels, risk levels, nature of assets and financial slack. Tax relief advantages can accrue on interest payments in a profit making venture. Capital allowances often lead to tax advantages as well. In hyperinflationary environments like Zimbabwe with negative real interest rates, debt financing may be useful as long as prudence is exercised in case the interest rate policy changes. Many entrepreneurial ventures were caught flat footed when a new central bank leadership introduced a tight interest rate regime.

Entrepreneurial firms with intangible assets have a high risk of financial misfortune and therefore should avoid or at least minimise the use of debt financing.

Royal Bank used debt financing effectively because it included buildings as physical assets in its acquisition of new branches from established banks and hence had built-in residual equity value. It created an opportunity to leverage the tangible assets. If an entrepreneurial company has a high growth strategy it would need to have financial slack that enables it to access competitive financing to exploit emerging opportunities.

However if it is highly geared (high debt to equity ratio) then it may disadvantage itself. From the sample of banking entrepreneurs reviewed, only Royal Bank used debt financing as its major source of funds. Mzwimbi prudently pursued a debt financing strategy because he had sufficient value in his Econet shares. He could have sold a portion of his equity in Econet and financed the launch of the bank. It was his belief that his equity would grow in value if he just leveraged it as collateral rather than dispose of it. In effect he was exploiting the negative real interest regime that obtained in Zimbabwe at the time. His decision was vindicated as the value of his equity in Econet soared a few years later, while Royal Bank comfortably repaid its loan.

The fact that only a small minority of entrepreneurial banks used debt financing testifies to the limited use of debt in hyperinflationary environments as a source of start up capital. This is contrary to the finding in developed countries where entrepreneurs prefer debt financing, which enables them to retain full control, and the practice of risk avoidance strategies.

Advantages of Debt Financing

Debt financing allows entrepreneurs to retain ownership and control. This explains the phenomenon of equity aversion exhibited by most entrepreneurs. Some entrepreneurs have been known to avoid loss of control through delegating some equity even if this was a prerequisite for optimising profitability, business development and business growth.

A degree of financial freedom is maintained as debt obligation is limited to the loan repayment period only, whereas the claims of equity investors would subsist as long as they hold on to their equity. Consequently it enables the entrepreneur to make key strategic decisions without being encumbered by investors. The profits of the organisation would predominantly accrue to the entrepreneur and can therefore be reinvested rather than be distributed to investors.

Although debt financing is expensive in the short term, in the long term it proves to be cheaper due to the impact of inflation. This is even more enticing in hyperinflationary environments.

Disadvantages of Debt Financing

Debt financing requires regular loan repayments which may cause discomfort as the initial stages are characterised by inconsistent cash flows in most start ups. As a result, the entrepreneurial firm may be faced with either stiff penalties for delayed or missed payments or, even worse, the whole loan may be recalled.

As previously discussed, the availability of debt financing to start ups is limited due to the MacMillan Gap. The issue of interest rate risk in volatile economies is a cause for concern. The high collateral requirement is also a disadvantage.

RaisingEntreprenuerialCapital1


Introduction

All entrepreneurial activity has to be funded in order to convert the business concept into a viable business. The financing strategy of the start up has a huge bearing on the success and viability of the concern. Most considerations of raising capital for entrepreneurial ventures focus on initial capital only. It is my belief that a consideration of entrepreneurial capital should include the capital requirements throughout the business lifecycle. Many entrepreneurial ventures may be successful in raising initial capital but fail in subsequent efforts and hence the venture fails. Financial constraints cited as some of the reasons why entrepreneurial ventures fail include undercapitalisation, poor demand forecasting and poor handling of finances. The next few postings will analyse the challenges faced by Zimbabwean entrepreneurial bankers in adequately financing their ventures. We therefore learn from those who have gone before us. These postings are extracts from my recently published book – Entreprenuership On Trial obtainable from http://www.lulu.com as both hard copy or soft copy.

Financing Gap in Entrepreneurial Ventures

The pioneer entrepreneurial bankers faced significant challenges in raising funds for their ventures. There was a funding gap as sources of funds were hesitant to lend to new start unproven entrepreneurs. A major potential source of funds was the established banks but these were not eager to fund the emerging competition. It therefore appeared as if these entrepreneurial bankers were being discriminated against in terms of access to and availability of capital sources. However this was not confined to them alone, as these restrictions occur with any start up.

In entrepreneurial literature the supply side of the financing gap, often called the MacMillan Gap after the UK Commission which first identified it, is often attributed to the following:

  • · Unwarranted prejudice from capital markets.
  • · The requirement to accept punitive rates or provide huge collateral security caused by the perception of being high risk investments. Considering the failure rate of start ups, these fears are indeed justified.
  • · Credit rationing which discriminates unfairly against the entrepreneurial firms, irrespective of viability of venture. (Beaver 2002).

Information asymmetry implies that the project promoter may not make sufficient information available or may hide certain undesirable facts in the business plan and this may lead lenders into adverse selection. Since the choice of which project proposal is of good quality is difficult to establish a priori, many financiers simply choose to avoid funding entrepreneurs rather than expose themselves to undue risk. Others would still fund entrepreneurs and minimise the information asymmetry risk through:

  • · Closer working relationship with the entrepreneurs and establishing a good commercial understanding of the business and its environment. However, this entails heavy and costly monitoring activities which other funders resent.
  • · Demanding significant collateral cover for the loan. The logic is that the entrepreneur will be prepared to assume some reasonable risk if he is convinced of the prospects of his venture succeeding or that it is low risk.

Capital Structure

Capital structure can be defined as the proportion of the company’s capital that is obtained through debt and equity. After much debate, most writers seem to concur that there is no optimal capital structure that can be recommended i.e. each differs depending on the environment, the preference, perceptions and attitudes of the founders, and the prospective cash flow position of the start- up. From an analysis of the Zimbabwean banking sector it appears that there was no single approach to the capital structure.

An optimal capital structure for any entrepreneurial venture strikes a balance between risk and return, thereby maximising the share price while minimising the cost of capital.

Entrepreneurialbenefits6


Impact on Individual

In this final posting on benefits that your business can have we focus on the benefits to the entrepreneur and his family. We have thus shown that starting a business benefits all stakeholders. Proceed then and start your business and dedicate it to the glory of God and in the service of mankind.


1. Wealth Creation

Significant wealth was created by entrepreneurial bankers for their benefit and for the benefit of their families. The profit motive is a genuine, legitimate and beneficial purpose for entrepreneurial activity. There is nothing sinister or absurd about it. Entrepreneurs assume significant calculated risks in building their organisations and therefore should reap the rewards that emanate from the success of the endeavour in as much as they would assume the resultant loss if the venture failed.

Entrepreneurial bankers assumed significant risk to their financial security, professional reputations and personal relationships, as they ventured into the uncharted waters of entrepreneurship.  It is only fair and equitable for them to be adequately compensated within the reward system for the risks taken. It is easy to complain about the wealth that has accrued to these and other risk-taking bankers, while enjoying the comfort of our risk free lives. An investment principle states that the higher the risk assumed, the higher the likely yield. It should not surprise us then when those who took the greatest risk benefit from it.

Some entrepreneurs expanded into other industries. The most notable ones are Kingdom Bank and Interfin Merchant Bank founders, who spread their wings into varying industries like hotel and leisure, furniture manufacturing, brick making, farming etc. This is a normal outgrowth of entrepreneurial activity as new opportunities are detected and explored.  It should neither be criminalised nor frowned upon, but rather be applauded.

Another form of wealth creation by entrepreneurial bankers emerged from high paid executives and investors to whom entrepreneurs redistributed wealth through stock options and employee share schemes. Investors who acquired shares in new start- up banks created massive wealth for themselves when these were publicly listed. A non-banking example is Strive Masiyiwa, whose Econet Holdings is reputed to have created about ten billionaires out of its employees. That is empowerment.

2. Personal Development

When an entrepreneur detects an opportunity despite the environmental uncertainty, he speculates as to its potential for commercialisation. If he manages to commercialise that opportunity and grow it to maturity, he realises his potential: a sense of destiny and accomplishment. It completes and fulfils him as a person. The entrepreneurial process develops the entrepreneur as a person and helps him shape a view of the world. This personal development process makes the entrepreneur a better person who contributes meaningfully to societal development. Entrepreneurship creates avenues for self-development, individual achievement and self actualisation.

EntrepreneurshipBenefits5


Today we continue on the benefits made by entrepreneurship on the national economy. Your business has an effect on the national economy for the good. Read on and be encouraged to start making a difference.

4.Local Control and Accountability

Developing countries complain of exploitation by multinationals as most of the financial resources and profits leave the country. Politicians and activists were baying for the blood of executives from multinational banks e.g. Barclays and Standard Chartered, arguing that their activities were not benefiting the local economy, nor were they accountable to the Zimbabwean people.  The rise of entrepreneurial local bankers created local control and accountability of banks. Similarly, it has been argued that overdependence on large conglomerates supported by international finance is unhealthy. An example is huge corporations which either slow down operations, withdraw investments or transfer manufacturing capacities to cheaper economies at will, especially when the local economy is in turmoil or there is political risk, as in Zimbabwe. The larger conglomerates may be affected by political decisions or legislature in their countries of origin.

5.Increased Tax Revenue for the State

The success and profitability of the banking sector, driven by the entrepreneurial bankers, contributed significantly to the national fiscus through taxes.  Corporate, income, property, social security and sales taxes rose, to the benefit of the national economy. Inspired by the super profits in the banking sector, the State imposed a 5% banking levy on bank profits.  Indirectly, as funding became available, people could afford to purchase more goods, resulting in increased sales tax. The improved revenue collection by local and national government from the entrepreneurial activity resulted in the government reinvesting some of these proceeds to improve the social and economic infrastructure e.g. in education and health.

EntrepreneurialBenefits4


Impact on the National Economy

In this posting I discuss the beneficial impact of entrepreneurship on the national economy. Your business has impact on the national economy. You are adding value. So keep dreaming and working on the business.

1. Diversify Economic Base

    Entrepreneurial banking activity in Zimbabwe created a profitable industry that became the beacon and pride of the nation at that time. This helped diversify the nation’s economic base. Indirectly, as bankers competed they made financing structures available to different entrepreneurs from different sectors. This improved access to funding and financing structures for both management buy outs/ins and green field ventures.  New industries that sprang up due to the availability of funding played a prominent role in the diversification of the national economic base.  For example Shingai Mutasa of TA Holdings once stated that his company’s entrance into the Botswana market was funded by Kingdom Bank and ABC Bank. His contention was that the local Botswana banks would not fund his venture but fellow Zimbabwean institutions came to his rescue. Entrepreneurial organisations enhance the diversity of a nation’s economic base while providing it with the opportunity to respond to a variety of global market conditions. Consequently entrepreneurship increases the nation’s global competitiveness. Zimbabwean banking became the envy of the region as it outbid even RSA based banks on major regional projects.  This validation is evident when one considers that most bankers who left the country were absorbed into the neighbouring countries’ financial sectors.

    2. Engine for Economic Growth

      The success of entrepreneurial banks inspired the entrepreneurial spirit in other sectors of the economy. Other entrepreneurs emerged. The economic growth generated by entrepreneurial bankers became the core engine for a virtual cycle.  The success of the initial pack of bankers created more growth as other bankers and entrepreneurs flexed their entrepreneurial muscles. The bankers made access to capital finance easier at the time when the hyperinflationary environment made borrowing fashionable, due to negative real interest rates prevailing on the market.  The successful bankers in turn invested portions of their newly acquired wealth in other entrepreneurial ventures, as either informal and angel investors to business concerns run by close family and friends, or as venture capitalists as they sought equity in green field investments from other industries.  A number of bankers have re- invested part of their wealth into other sectors of the economy, e.g. horticulture, hotel and leisure etc.

      3. Employment Creation

      During the period 1995-2005, the economy was in turmoil and a significant number of  large companies were rationalising and restructuring. Other companies closed down due to viability challenges while numerous multinational conglomerates either trans-located to neighbouring countries or moved a significant portion of their productive capacity outside Zimbabwe. This led to massive retrenchments and the unemployment rate rose past 70%.  The entrance of entrepreneurial bankers led to a fast growing financial sector, which created jobs. At a time when most industries were shrinking, the financial sector contributed to the reduction of unemployment.  Another effect of this was the retention of critical banking skills in the country. Some bankers who had left the country returned and used their skills to help develop the economy. This was at a time when the country suffered a huge haemorrhage of its skills as professional and skilled people left the country. However the blooming banking sector, driven by entrepreneurs, had drawn people back to the country. Due to intense competition for critical staff, banks offered incredible benefits to key employees e.g. significantly reduced financial loans for purchases of houses and vehicles. This in turn improved the demand for rental properties and vehicles, resulting in an explosion of vehicle sales, construction and real estate industries. The downstream benefit was increased employment opportunities in these industries as well. Indirectly, these bankers preserved jobs by providing sources of bridge funding for distressed firms to restore their viability, thus circumventing retrenchments.  Informal sector funding provided home-based businesses for the livelihoods of those who had been retrenched. It can be argued, therefore, that banking entrepreneurship slowed down the rise in the unemployment rate as well as creating secondary wealth (social benefits, housing etc), benefited downstream industries e.g. car dealerships and construction industries, and drove salaries and wages up.

      EntrepreneurialBenefits3


      In today’s post we unravel how entrepreneurs benefit society through creation of new market niches for products as they meet people’s unmet needs as well as the impact of philanthropy on society. As new business people get into newfound welath they empower others through charitable works and deeds. They take care of the poor. Read on.

      4. Creation of New Market Niches

      Banks like NMB and Trust Bank took service provision to new heights as they sought to create personalised high net worth market niches.  These banks completely revolutionised banking for the benefit of society. The traditional banks had not segmented the individual market – but this was done successfully by entrepreneurial bankers.  NMB and Trust used this as an entry route into commercial banking, thus avoiding head-on confrontation with the traditional big three.  When large corporations ignore legitimate needs of the community as not worth their effort, entrepreneurs can and will create niche markets to meet these needs.

      5. Philanthropy

      Many of the entrepreneurial banks took philanthropy and reinvesting into the community to greater heights as corporate responsibility moved into centre stage of marketing campaigns.  ReNaissance Merchant Bank created Munotidaishe Trust which currently funds tuition fees for orphans as well as empowering widows through provision of financial resources to start home-based businesses.  ReNaissance includes its philanthropic donations into its main budget, as a business expense that is factored into its pricing model. An example of Zimbabwean entrepreneur aggressively engaged in philanthropy is Capernaum Trust, which was established by Strive Masiiwa of Econet.  Entrepreneurial bankers deliberately and competitively engaged in causes such as  scholarships/bursaries and career attachments to university students, contributions to the National Aids Council, as well as funding various charitable concerns and in sponsoring cultural and sporting events.  Bankers also competed in raising funds in times of national disasters e.g. in the aftermath of Cyclone Eline in 2000-2001, most banks raised significant financial resources to assist the State in the relief efforts. Entrepreneurs engage in philanthropic ventures that supplement and complement the public purse, for the benefit of the community.

      EntrepreneurialBenefits2


      In today’s posting we discuss the benefits delivered to the society by entrepreneurship in terms of reducing social inequity (imbalance) and creating awareness of new products. I discuss these benefits based on the Zimbabwean banking entrepreneurs. Enjoy and be motivated.

      1. Social Inequity

      Many indigenous bankers had reached their ceiling in terms of promotion and career opportunities. However entrepreneurial banks created a market opening for them to transcend this social inequity.  It reframed the structure and composition of the financial services sector, allowing for meaningful expression of meritocracy and opportunity. Some entrepreneurial bankers, who may not have had an opportunity to rise past the glass ceiling, created banking structures that have since proven their skills and improved the national economy. Certain segments of society which had no access to banking products that were reserved for the elite were given a fair chance to access them.  Many indigenous people had minimal collateral and hence failed to get loans from established multinational banks.  However the entrepreneurial banks assessed not only the collateral but also the viability of the project and thereby created structures to fund the projects based on viability and other forms of security.  This increased access to financial products, resulting in many people’s lives being improved.

      3. Awareness of Financial Products

      Before the appearance of entrepreneurial bankers, a significant majority of the indigenous people was uninformed of banking products.  Most local people were allowed to open only low interest savings account. Very few had access to checking (current) accounts. As one banking client noted, until there were entrepreneurial banks there was a lot of information asymmetry as bankers were secretive with information. She claims that she was not aware of different kinds of banking accounts and their benefits. Kingdom Bank spearheaded a well received awareness campaign for Unit Trusts . It has consistently run a weekly televised program called “Making Money Make Sense” for  years.

      This programme has been hailed as the flagship of a public awareness campaign to demystify banking through explaining the different financial and investment instruments, and how to access them, in simple terms.  Consequently a significant number of people started investing on the money market, thereby increasing their wealth.  Until this time the traditional banks had kept money markets a secret and thus constrained the majority of people to being money savers and not investors.  These entrepreneurial bankers created options and avenues for the average person to participate as an investor. It empowered society for wealth creation.

      Entrepreneurial bankers were passionate about educating their fellow indigenous people on ways of creating wealth through financial instruments. After Kingdom Securities became synonymous with Unit Trusts, it proceeded to popularise investments on the stock exchange by non-professional investors.  The newly wealthy entrepreneurs kept pushing the boundaries and creating awareness for their kith and kin to access the wealth-creating strategies that had hitherto been hidden from them. Consequently the last ten years have seen ordinary Zimbabweans being actively involved on both the money and stock markets.

      EntreprenuerilBenefits1


      Impact on Society

      The impact of entrepreneurship on society can either be positive or negative, depending on the form of entrepreneurship (productive, non-productive or destructive) that manifests itself in that society.

      1. Overcoming Lags

      Any society or community develops some patterns slowly which over time solidify and therefore creating developmental lags as it takes time  for society to break out of these patterns and adapt to the changing environment. New daring business starters innovatively arouse  society out of slumber through new products and services. For example the banking industry in Zimbabwe was outdated and sluggish. There were only five commercial banks in the country in the early 1990s, most of which were characterised by poor service. The entrance of entrepreneurial bankers created a demand for personalised world class service delivery in banking. New forms of banking practices for the convenience of society were introduced e.g. Automated Teller Machines, e-banking, relationship marketing and instore banking. Entrepreneurial bankers assisted in the development, assimilation and dissemination of new forms of technology and innovation within the industry.  Competition intensified, resulting in more customer responsiveness. The customers’ right to choice and service was reasserted. As one banking client so aptly stated, “the new banks provided me with a choice to vote with my feet whenever service was unacceptable.” Society had been putting up with unacceptable service quality due to lack of competition. As Peter Drucker states, “Entrepreneurs seek change, respond to it and exploit it as a profit  generating opportunity.” Entrepreneurs, either discover or create innovation in order to exploit emerging trends.

      Entrepreneurs introduce new products and services when the larger traditional businesses lack either vision or interest in bringing these innovations to the market.

      In the Zimbabwean scenario this led to:

      · Discovering new distribution channels e.g. Kingdom’s in-store banking brought convenience to both shopping and banking. Both in-store banking and ATMs introduced longer and more flexible banking hours.

      · New price strategies – the intense competition resulted in lower service fees and accessibility of banking products. E.g Trust Bank customer visits

      · Introducing new technology, e.g. CFX, provided mobile banking which enabled customers to pay their bills from mobile phones.  E.g. Trust@ Ease and E-banKing respectively.

      · Mass distribution of products. Kingdom and Century created structures through in-store banking that enabled the masses to access banking products.

      Entrepreneurial banking therefore provided society with choices, upgraded the technological infrastructure of Zimbabwean banking from an outdated mode to contemporary models.

      Entrepreneurs create new technologies, new products and services that increase choices and enrich lives,  resulting in societal well-being and  increased productivity.

      Creating, nurturing and celebrating champions