ZIMBABWE’S microfinance sector has not been spared from macro-economic challenges that have seen companies shutting down and thousands losing jobs. Players have, however, devised new products to remain afloat at a time banks are also going big on microfinance. Zimbabwe Independent business reporter Taurai Mangudhla (TM) caught up with Zimbabwe Association of Microfinance Institutions (Zamfi) board chair Patrick Mangwendeza (PM) at the Zamfi CEO Winter School in Masvingo last week to discuss challenges and opportunities in the sector. Below are excerpts;
TM: The general public has lost confidence in the financial services sector due to, among other reasons, rising non-performing loans (NPLs) and associated problems. What is the situation with MFIs?
PM: The central bank covered this issue in their presentation in depth and as an industry we are on an average of 11% which is less than the banks. The good thing is that NPLs are on the decline for MFIs because the rate has moved from around 30% to what it is right now.
TM: What do you attribute the reduction in NPLs to?
PM: There is clearly improvement as I noted earlier. And obviously institutions have put in several risk management systems in place. People are being more cautious, so I would say there is an improvement and we expect the rate to actually decline further.
TM: There has been a lot of debate on the implications of mobile money to traditional banking and it has been noted mobile money is serving the low income bracket more than MFIs. What is the general attitude among MFIs towards mobile technology, particularly mobile money and its implications to their operations?
PM: Mobile technology brings both opportunities and competition, but I personally look at it as complimentary to our business. We need them for us to execute our operations as it were so it’s very complimentary, but certainly they are quite a player in the space and we can’t do without them.
TM: Banks are now opening microfinance facilities and this has largely been viewed as a threat to MFIs because of the size of banks’ balance sheets and structure. What is your take on this?
PM: That’s what we want, we welcome that. It’s going to work towards sanitising the interest rate structure. So, we welcome that as an industry.
TM: MFIs have been labelled loan sharks or likened to illegal money lending clubs that charge usurious interests rates and rip off the unsuspecting members of the public of their assets in the end. What is Zamfi doing to deal with this perception?
PM: We are moving very fast in addressing that perception. Unfortunately perception becomes reality if proven one way or another. We have done a lot in the past three years to prove to people that we are not what they think we are. At the end of the day, I think competition is playing a part in making sure everything is sanitised so I think we are getting there.
TM: There has been debate over whether small MFIs should be consolidated into fewer bigger institutions that have larger balance sheets. What is your take on the subject?
PM: This is a broad subject which is topical at this event, but I think if you partner with other institutions, then you are looking at a bigger cake. Obviously, some promoters want to continue being “Mr so and so,” but I think it is the way to go because one has to accept that the bigger you are, the better you can become. That’s what the industry wants to see, but it’s up to the players.
TM: We have seen foreign investors taking over local financial institutions only to discover some irregularities later, what does this mean to you when MFIs are seeking investors?
PM: I want to say that new funders or investors are ready to come. Some are actually in Zimbabwe. The example you give speaks on the quality of due diligence on the part of the investor so I think it’s really up to the investor to carry out through due diligence.
As an industry, we are ready and investors want three things: good corporate governance, credit risk mechanisms and systems in place. Those are the critical things that they want to see as professionals. As an industry, we are certainly ready.
If investors come, one needs to put these things in place to make themselves attractive. The funding is not really an issue, we have to sort ourselves as organisations before investors come.
TM: Are deposit-taking MFIs the future?
PM: It depends on the institution, it will really differ from one institution to another, but certainly we have to grow. You can’t remain credit only institutions for years.
TM: Going forward, where do you see opportunities for growth?
PM: The underserved market is the rural. It is hardly tapped, so there is still huge opportunity to go out there.
Its waiting for us and I still see lots of opportunities because there are areas banks have not gone, we have not yet gone into some of the areas particularly in the remote areas.