‘10 percent interest rate reasonable’

Source: ‘10 percent interest rate reasonable’ – Sunday News Mar 5, 2017

Dickson Mangena, Business Reporter
MICRO Finance institutions have started complying with a Reserve Bank of Zimbabwe directive to peg their interest rates at 10 percent per month in order to remain relevant and contribute to the growth of the country’s financial service sector.

The RBZ had instructed that in the spirit of building inclusive financial systems and sustainable economic development, microfinance institutions were required to align their lending rates to ensure that the effective lending rates, interest rate plus all applicable fees and charges, do not exceed 10 percent per month from effective 1 January.

Some of them had, however, not aligned the rates since the directive was announced. Speaking on the sidelines of an annual outlook meeting for institutions held in Bulawayo last week, the Zimbabwe Association of Microfinance Institutions (ZAMFI), president Mr Godfrey Chitambo said MFIs are already complying with the policy, although some may be be feeling the heat.

“The 10 percent interest rate was the most reasonable considering what the Reserve Bank of Zimbabwe was looking for and where most of the rates were before. We have already implemented the 10 percent interest rate since it has become policy.

However, we cannot say that it is working for everyone since we have different cost structures,” Mr Chitambo said.

He said if a need for further dialogue with the RBZ arises on the issue, the association will not hesitate to approach the bank as both parties are working towards improving the financial sector of the country.

“There is goodwill on the regulator and we know that if we have issues we will be able to dialogue with them again but for now we are trying to operate within the set 10 percent,” Mr Chitambo said.

He also said the meeting was meant to equip members to raise knowledge levels and compliance of the new microfinance act.

“The new act needs analysis as some of our members were caught by surprise on the some of the issues. We are trying to avoid a situation where our members would be caught on the wrong and will be made to pay penalties of non compliance. It is high time the microfinance sector got rid of bad reputation that used to haunt the sector,” said Mr Chitambo.

According to the RBZ, a microfinancier is urged to put in place robust ICT management information systems to facilitate integrity of records and information, submission of reliable and accurate information to the Reserve Bank, and participation in the Credit Registry, Micro to Small and Medium Enterprises (MSME) credit guarantee scheme, and the Collateral Registry which are part of the central bank’s initiatives to be able to regulate and build the sector’s capacity.

Statistics from RBZ show that the sector recorded a 17,90 percent increase in total loans from $174,97 million as at 31 December 2015 to $206,28 million as at 31 December 2016, which constituted 5,30 percent of total financial sector loans of $3,89 billion as at the same date. The sector witnessed improvements in terms of funding to the productive sector ($151,38 million), which constituted 73,39 percent of the total sector loans.