Financial Reporting's Impact on SME Growth Via Stakeholder Relations and Finance Access in Rusape, Zimbabwe

Abstract

This study investigates the role of financial reporting in promoting the growth of small and medium enterprises (SMEs) in Zimbabwe, with a specific focus on Murangle Enterprise, a beverage manufacturing firm based in Rusape Town. SMEs are critical to Zimbabwe’s economic development, contributing over 50% to GDP and employing more than 60% of the workforce. Accordingly, there was a preliminary study focused on 10 purposively selected SMEs within Rusape primarily in the production and clothing sectors. The sample was designed to provide initial insights into financial reporting practices in a semi-formal business environment. The findings revealed that 60% of these SMEs do not follow formal financial reporting, underscoring the relevance of the research problem. Stakeholders, including potential investors and financial institutions, expressed concern over the enterprises inability to present credible financial data. Using a mixed-methods approach, the study collected primary data through stratified questionnaires and purposive in-depth interviews. Quantitative data revealed that a majority of stakeholders recognize the importance of financial reporting for decision-making, investment readiness, and operational transparency. However, Murangle lacks formal financial documentation such as income statements and cash flow records, resulting in missed investment opportunities and reliance on informal borrowing. Qualitative insights highlighted internal barriers including limited financial literacy, absence of trained personnel, and informal business practices. The analysis, guided by Agency Theory, Resource-Based View (RBV), and Greiner’s Growth Model, revealed that Murangle is in the early stages of formalization, where leadership and structural systems are still evolving. The absence of financial reporting was found to negatively affect stakeholder relationships and hinder access to institutional finance from entities such as Bank ABC, Nedbank Zimbabwe, and the Zimbabwe Women’s Bank, all of which require standardized financial documentation. The study concludes that financial reporting is not merely a compliance requirement but a strategic tool for SME growth. For Murangle, implementing robust financial reporting systems could enhance credibility, attract investment, and improve stakeholder engagement. The findings underscore the need for targeted interventions, including financial literacy training, capacity building, and digital accounting solutions tailored to SMEs. Moreover, the study provides actionable insights for policy makers, financial institutions, and development agencies seeking to support SME development in Zimbabwe. Through contextualizing financial reporting within Murangle’s operational reality, the research contributes to a deeper understanding of the challenges and opportunities facing SMEs in Rusape Town. It advocates for localized solutions and emphasizes the transformative potential of financial reporting in unlocking SME growth and resilience.