via Micro-financers seek US$100m | The Herald December 20, 2013 by Rumbidzai Zinyuke
ZIMBABWE’S micro-finance industry needs US$100 million to bring stability to the sector and to bridge the funding gap being left by the banks.
In an interview, Zimbabwe Association of Micro-Finance Institutions executive director Mr Godfrey Chitambo said the interest rates in the sector have remained high due to high cost of working capital.
“The sector needs in excess of US$100 million to function properly but currently there is no foreign direct investment which means the cost of capital is still high,” said Mr Chitambo.
“Some MFIs borrow money from commercial banks but because they get it at high costs, this means they also have to charge the consumer a higher rate for them to stay in business,” he said.
MFIs are charging unsustainably high interest rates of as much as 40 percent per month or 480 percent per annum, contrary to the objective of micro-finance of uplifting the standards of low- income earners.
Mr Chitambo said the liquidity crisis had affected the way MFIs conducted business in 2013 which meant money was being borrowed on a short-term basis.
“The challenges we have been facing have been the same. We have a liquidity crisis and this means that the money we lend has to be short term and the ordinary people who want to access it will not be able to afford it,” he said.
He said the industry needed a pool of funds where MFIs could borrow at low interest rates and onlend to their clients at rates as low as 15 percent per annum.
The association established a wholesale facility where MFIs could be able to access funds at a cheaper rate so that they could lend to the public at cheaper rates.
“We have so far disbursed US$2,4 million to 11 MFIs out of the 176. Some of them are failing to meet the criteria. We have made many concessions so that people can be able to access these funds but we have noticed that skills are lacking so we want to do skills training,” he said
The Reserve Bank of Zimbabwe earlier this year raised the minimum capital requirements for MFIs from US$10 000 to US$25 000 while microfinance banks had to be capitalised to the tune of US$5 million.
Mr Chitambo said most MFIs were fully capitalised and the increase in the number of registered institutions was a good omen for 2014.
“We have seen the number of registered MFIs increase from 130 to 176 as at June 2013 and this shows their seriousness in doing business. Only a few MFIs who hold RBZ licences are currently not operating and this boosts confidence in the sector,” he said.
Going forward, Mr Chitambo said ZAMFI was looking into cleaning up their image.
He said the association would embark on a consumer education initiative that was aimed at curbing reckless borrowing.
“There is nothing called instant cash and we want to educate the public about that. In future, we will have contracts that the public will have to read through and understand before signing and getting loans,” he said.
He added that the drive would be done in consultations with the Ministry of Finance, RBZ and the Consumer Council of Zimbabwe.
Mr Chitambo also said the ZAMFI would embark on extensive capacity building to upgrade the available skills in the industry so that they could be able to compete on the international market.
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