MFIs bank on development projects

Micro-finance institutions’ (MFIs) total loans amounted to US$173,3 million as of September 2015 with 53,73 % channelled towards development and productive sectors, an official has said.

Fidelity Mhlanga

Zimbabwe Association of Micro-finance Institutions (Zamfi) executive director Godfrey Chitambo said a significant chunk of MFIs’ loan books were focused on developmental projects, dismissing long-held notions that most MFIs’ loans were salary-based and mainly for consumption.

A money changer holds stacks of US dollar notes in Jakarta, August 29, 2013.  REUTERS/Beawiharta

“The consolidated figure for the whole micro-finance sector was US$173,3 million as at 31 September. The Reserve Bank of Zimbabwe (RBZ) says we have put 53,73% of the total loans into developmental sector or US$93,12 million,” Chitambo said.

He said MFIs had advanced loans to productive farmers especially those cultivating under irrigation, those in poultry as well as farmers enjoying a working value chain system.

MFIs are offering lending to agriculture at an affordable 2,5% interest rate per month with bullet payments done after the tenure.

He said consumer based lending was conceived by the use of payslips by the lender as security which was being used as a risk mitigation measure and yet the money was being used as capital for projects.

Chitambo said lending to small to medium enterprises (SMEs) has been the target market for MFIs but presently the increasing informalisation of the sector was making it difficult to extend loans.

“The skill of MFIs is to lend and recover money. It is now difficult to find organised SMEs.What we are saying is that government should train the informal sector so that when we lend them we don’t face problems,” Chitambo said.

Out of 146 registered MFIs 60-67% of them are in Harare, 18-25% in Bulawayo with the balance scattered in towns across the country.
A total 8% of the registered MFIs are not operating.

About 92 are Zamfi members and their loans were US$68,2 million as at end of September.

“The presence of MFIs per town is bad; MFIs are following where there is economic activity. The nerve centre of activity is in Harare. We feel that as MFIs we must be where the people are. About 70% of our people are in rural areas. For financial inclusion to happen, we would want them to service our rural population as well,” he said.

The RBZ regulatory minimum capital threshold for a non-deposit taking MFIs is US$25 000 and US$5 million for deposit taking institutions.

Currently, there are four registered deposit taking MFIs in the country.

According to Chitambo, MFIs were offering short tenured loans between 2010 and 2014 due to speculation surrounding the Zimbabwe dollar return with interest rates hovering at 31% per month.

The Zamfi executive said currently the 21% interest per month was in tandem with the high cost of capital stemming from the prevailing liquidity crisis.

In 2012, Zamfi established the Zimbabwe Micro-finance Fund (ZMF) currently capitalised to the tune of US$10,5 million .

A wholesale fund, ZMF, is offering lending to 18 MFIs, giving affordable lending of 1,5% per month.

Other MFIs normally get money from commercial banks which are normally expensive and lend it people making it difficult to charge lower rates.

The MFIs non-performing loans stood at 16,05% by end of September last year.


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