Abstract
The study sought to find out financial challenges encountered by retail SMEs operating in a multi-currency environment with particular reference to Gweru Urban in Zimbabwe. The replacement of the Zimbabwean dollar by foreign currencies gave birth to a multi-currency environment. The adoption of multi-currencies was necessitated by the need to curb inflationary pressures which characterized the economy up to April 2009.Convenience sampling was used to select 150 retail SMEs. The data were collected using questionnaires. The questionnaires were filled either by the owners of the SMEs or their managers. The study established that retail SMEs were facing several financial challenges in a multi- currency environment. The challenges included shortage of liquidity in the economy which resulted in low sales due to depressed consumer demand. In turn low sales negatively affected the profitability of the SMEs. High interest rates constrained the ability of SMEs to raise finance through bank loans and overdrafts. The use of personal savings and retained profits as sources of finance implies that SMEs could only raise limited amounts of capital. The financial position of the SMEs was also worsened by high operating expenses and lack of trade credit. In light of these financial challenges the study recommends that the Zimbabwean government should adopt a long-term policy on the use of the foreign currency. It is also imperative that the government of Zimbabwe swallows its pride and officially makes arrangements with South Africa or the United States of America in order to have an increased supply of the rand or US dollar. The SMEs should also devise survival strategies such as formation of strategic alliances and voluntary chains.