THE Reserve Bank of Zimbabwe (RBZ) and registered microfinance institutions (MFIs) have called on parliament’s budget and finance committee to support on a host of amendments to policies governing operations of microfinance institutions aimed at protecting the public.
Report by Taurai Mangudhla
This follows a series of incidences which saw members of the public losing their cash to unscrupulous MFIs who were taking deposits without authorisation and charging exorbitant interest rates on loans.
Submitting oral evidence before the parliamentary committee this week, RBZ governor Gideon Gono and Zimbabwe Association of Microfinance Institutions (Zamfi) executive director Godfrey Chitambo said the country should collapse all policies relating to operations of MFIs into one comprehensive law.
Gono said the current Microfinance Bill should be amended to repeal the Money Lending and Rates of Interest Act (MRIA).
“It is not desirable to maintain fragmented legislation on microfinance institutions. It is therefore recommended that MRIA be repealed and that all its useful provisions be fully integrated into the Bill so that they will be one coherent piece of legislation governing the operations of all MFIs,” Gono said.
Chitambo said MRIA was outdated and should be replaced with new and more relevant policies.
“Firstly, MRIA of 1935 has seen a lot, so for us to think it is still in sync with what’s happening is not prudent. Those statutes which are archaic should be repealed and substituted with a new Act,” said Chitambo.
“The new Microfinance Act should have everything to do with microfinance institutions instead of having many bills.”
Chitambo said MFIs are also seeking clarity on definition of terms and at the same time ensure the policy draws parallels from internationally recognised institutions. He said his body had proposed perpetual licenses in light of the introduction of deposit taking MFIs.
Gono and acting committee chairman Bulawayo South MP Eddie Cross agreed to the proposal for a perpetual license on grounds that the license holders paid annual fees to support the central bank’s supervisory role.
The central bank chief said deposit taking microfinance banks should be required to have a minimum US$5 million capital base, staggered over five years, as opposed to the current US$25 000 currently applicable for credit-only MFIs.
Gono said there should only be two categories of MFIs, credit-only and deposit taking MFIs. He proposed that banking institutions with a microfinance department should not be subject to the microfinance legislation unless they have a fully fledged microfinance subsidiary.
The RBZ also sought amendments to Clause 31 which requires microfinance institutions to notify the Registrar of appointment of a CEO or chief accounting officer saying the institution should instead be required to seek approval prior to the appointments.
Zamfi chairman Victor Kunoita said requirements for a board of directors should be viewed in tandem with capital levels of each category of MFIs with the lower end being exempted.
“We think it is onerous for a person who has seen an opportunity in the rural areas using US$10 000 or US$20 000,” he said.