Assessing the impact of exchange rate volatility on the informal economy in Zimbabwe: A case study of Mbare Mupedzanhamo (Flea market) in Harare.

Abstract

This study aimed to evaluate the impact of exchange rate volatility on Zimbabwe’s informal economy, with a specific focus on Mbare Mupedzanhamo. The case study approach was chosen for its suitability in assessing the effects of exchange rate fluctuations within an authentic business environment. A random sampling technique was employed to ensure representativeness, and from a population of 200 informal traders, a sample of 80 participants was selected. The study’s findings revealed significant challenges for traders arising from exchange rate volatility. One of the primary issues identified was capital erosion, which severely impacted traders’ ability to restock goods and sustain their businesses. As a result, many traders found it increasingly difficult to maintain operations, while borrowing as a means of financing became unsustainable in such an unpredictable environment. In response to these findings, the study came up with several key recommendations. First, it was suggested that financial institutions develop more affordable credit lines accessible to small traders, with fewer stringent requirements, such as collateral, which many informal traders lack. Additionally, it was recommended that the government prioritise financial support for informal traders by expanding funding access through Small to Medium Enterprises (SMEs) structures. By offering targeted financial resources, both financial institutions and government bodies could support the resilience of informal traders facing economic instability and enable a more sustainable environment for growth within Zimbabwe’s informal economy.