By Shingirai Vambe
The field of microfinance encompasses a wide range of financial services, mostly extended to the poor, or small to medium scale enterprises (SMEs) seeking capital for growth.
The sector has been in existence since the15th century.
In Zimbabwe, where a high country risk profile has discouraged banks from lending to SMEs and other productive sectors, microfinance institutions (MFIs) have grown and improved their services, taking advantage of the gap left by the big lenders.
They have transformed into the driving force behind SMEs growth, according to official statistics.
Regulators like the Reserve Bank of Zimbabwe (RBZ) have acknowledged the role that MFIs play in Zimbabwe’s economy. But they say they want them to operate within the confines of the law to bring order on the financial services landscape, with over 80 percent of Zimbabwe’s productive ages unemployed, small businesses have come to appreciate the service rendered by MFIs. And during a recent major event for these small scale lenders, said they were ready to play their part in Zimbabwe’s recovery.
Zimbabwe Micro Finance Institution Chairperson, Godfrey Chitambo told the Post On Sunday that an increase of players in the MFIs sector has led to the need for more monitoring to flash out bad apples.
“The sector is growing and responding to the demand that is there. What the sector should do now is to do its business professionally,” added Chitambo.
Economic analyst Vince Museve told this publication that MFIs were a vital part of Zimbabwe’s financial inclusion strategy, lending loans to rural areas.
“The cost of credit from MFIs is rather high which negatively impacts borrowers. The recent launch of the collateral registry should see an increase in micro finance loans by using movable property,” added Museve.
He said access to credit or capital was critical for economic growth. However, the costs are prohibitive.
Small businesses have told the Parliament of Zimbabwe Portfolio Committee on indigenization, women and empowerment that there has been no funding from government. They say they are relying on MFIs.
Reserve Bank of Zimbabwe deputy Governor, Dr Jesimen T, Chipika confirmed recently the growth of the sector through the capitalization improvement to ZWL $22.36 billion as at September 2022. This figure was ZWL $5.16 billion as at December 2021.
In a speech read on her behalf by Simbarashe Mashonganyika, Chipika said the sector maintained an upward trajectory in terms of size, and registered a 345.05 percent increase to ZWL$31.83 billion as at September 30 2022, from ZWL $7.15 billion as at December 31 2021. She said loans to female borrowers increased to ZWL $10.96 billion as at September 30 2022 from $2.3 billion as at December 31 2021.
“The bank (RBZ) considered the important role played by microfinance institutions in economic empowerment of MSMEs, women, youth and other marginalized communities. As such I urge MFIs to use this opportunity to seek approval to lend in foreign currency and grow their capital base to ensure sustainability,” Chipika said.
She, however, warned MFIs to follow regulations.
The ZAMFI Chairman, Eilex Felix Muzvondiwa said year 2022 stand out as a transitional period for the sector at large as hey jointly honed and calibrate their operations towards recovery through survival adjustments to ravaging Covid-19 pandemic which is still hovering over and the resultant economic recession which might take years to get over with.
Solten Financial CEO added his voice, highlighting the gap that continue to exist within the rural communities.
The 4th ZAMFI awards saw Export Credit Guarantee Corporation receiving an award of exceptional business growth and survival service to the MFI sector.
The most profitable and financially stable, and the resilient awards went to Red Sphere Finance Pvt Ltd. The most rural outreach award went to Virl Rural and Social Finance Service. Solten Financial Service was the runner up in that category.