FIDELITY Life Assurance (Fidelity)’s plans to venture into financial services have been stalled by parliament’s delay in passing the new Microfinance Bill into law, a top company executive has said.
Report by Taurai Mangudhla
Fidelity CEO Simon Chapereka told businessdigest this week the approval of the group’s licence application was now subject to the new Bill, which is yet to be passed into law.
“There is the Microfinance Bill which has gone through House of Assembly, but hasn’t gone through senate yet and this Bill has implications on the terms of the license,” he said.
“The RBZ (Reserve Bank of Zimbabwe) has said once the Bill goes through, we will finalise everything, but it is still pending.”
Fidelity late last year applied to the RBZ for a micro-banking license, with insiders indicating the group had long-term plans to expand into commercial banking.
At the time, well-placed sources said Fidelity was keen to diversify into financial services, taking up from the successes of the group’s microfinance institution.
The scope of the group is not only limited to a micro-banking licence but will also look into mainstream banking through the acquisition or partnership with an existing commercial bank for the long-term, Chapereka said.
In April, he said the company’s growth hinged on the success of its Southview Park high density residential stands project, with the potential to generate US$60 million revenue, and a micro-banking unit which it is keen to set up.
The micro banking arm will improve the group’s liquidity and increase the contribution of micro lending to profits from the current 3% of the microfinance loan book of US$6 million in 2012.
In May, the Microfinace Bill was passed on to the senate after a third reading in parliament. The bill is now awaiting approval in senate before it is taken to the president for signing into law.
According to the RBZ’s submissions before the parliament’s portfolio committee on Budget and Finance, the final Bill should have provisions that ensure deposit taking microfinance institutions (microfinance banks) are 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 microfinance institutions (MFIs).
The RBZ said there should only be two categories of MFIs: credit-only and deposit-taking MFIs. It proposed that banking institutions with a microfinance department should not be subject to the microfinance legislation unless they have a fully fledged microfinance subsidiary.
Soon after the Microfinance Bill passed through the lower house of parliament, Zimbabwe Association of Microfinance Institutions ( Zamfi) chairperson Clive Msipha said industry believes the proposed law will provide a solid legislative framework to operate in.
“We particularly welcome the move to allow players to apply for perpetual licences, with the regulator having the power to withdraw the licence of any misbehaving practitioner,” said Msipha.
“The Microfinance Bill itself takes a very customer-centric view in that many of its features are not any different to the requirements set out in the Zamfi Code of Conduct. The background is that Zamfi is also a signatory to the Smart Campaign, which is a microfinance industry initiative aimed at promoting responsible lending and transparent pricing.”