Growth And Commercial Evolution of Microfinance

By Shingirai Vambe

Funding, microfinance in Zimbabwe will see the elimination of what in past years was the key constraint to growth of the industry, that of access to sufficient capital as more and more initiatives are being looked at to keep the business going.

The regulator, Reserve Bank of Zimbabwe (RBZ) has since hinted on taking on board, concerns that MFIs have raised as they play critical roles in closing economic gaps existing in the country’s economy.

Institutions are currently facing challenges with funds to make every business and economy tick.

financial liberalisation in Zimbabwe ushered in a new socio-economic system where market forces play an increasingly dominant role in the economy. In line with these market forces, the government improved the conditions by enabling new firms to enter all sector of the mainstream economy through the removal of entry barriers and provisions of targeted incentives.

The global economic recession beginning in 2008 has been more widespread and severe. In some cases, microfinance borrowers have been affected by the economic downturn, job losses, and declining flow of remittances. Late payments on loans have recently risen across the microfinance industry.

Covid-19 and climate change also played a part in the process.

This has however made the MFIs to be creative and innovative, in dealing with delinquency and attracting more low income earners with models that are friendly and affordable.

The entry of commercially oriented providers substantially changed the microfinance field. The right conditions for rapid entry by new commercial players is now present in the marketplace: demonstrated profitability, The Growth and Commercial Evolution of Microfinance business models that can be copied, and competencies for working with low income populations.

The history of financial innovation suggests that once such conditions are present, spread can be very rapid.

This is the case in Zimbabwe, though, through various means information move with speed, majority have failed to access some of the available credit lines.

The Zimbabwe Association for Microfinance Institution (ZAMFI) says, the mushrooming of players in the industry reflect the rising demand in specific areas of the economy.

ZAMFI CEO, Godfrey Chitambo told the Post On Sunday Newspaper that the Global Money Week, is in response to the demand, sensitisation and educating of the youths and women, serious affected by employment crisis.

Zimbabweans continue to lose jobs, retrenchments are on going as companies are closing daily and the only means to survival is doing a private businesses.

“Women of today want to be recognised, as they also contribute into the national fiscals, they want to be independent and their business ventures need support and funding. growth in the sector become a positive trajectory in an economy like ours, the Zimbabwean economy,” Chitambo said.

He however placed a red tape on unregistered MFIs, that are operating outside the parameters of the law.

Chitambo challenged the media, to play its critical role in educating the public, whom in most cases suffer from these fly-by-night money lenders taking advantage of the liquidity crisis in the country.

“Pyramid schemes did not start yesterday, they have been there for over 2 decades; they come in different times and style and people still believe them to be fast and easy money. There is no easy money,” Chitambo said.

The growth and evolution of the microfinance sector in Zimbabwe and the world at large requires consumer literacy and protection, and this is the role of the RBZ, to educate and safeguard people’s hard earned money.

While microfinancing has been an overall beneficial lending practice, there are still some challenges to overcome. The predominant issue that needs to be addressed is increasing access to rural communities. Some 70 percent of the population in Sub-Saharan Africa lives in rural areas, where financial services are scarce.

This issue is compounded by the areas’ lack of infrastructure to help microfinance institutions reach them. Microfinance institutions must continue to expand their operations in Zimbabwe in order to maximize its benefits and keep the country on its current growth trajectory.

Though most MFIs haven’t migrated to digital platforms, digital migration has however stepped in with a paradigm shift into the sector, only for operators to improve connectivity, with the Postal and Telecommunications Regulatory Authority (POTRAZ) community information centres program, access to information and service becomes easy even in rural areas.

The sector is the only hope for Zimbabwe, changing the micro economic environment, with various products that will close the gap of both the economy and livelihoods of people in the country, MFIs are urged to explore, tape new markets and attract investment even with the outside world so that they surpass their targets towards vision 2030.

There is an increased interest in pursuing the SMEs and MFIs as a poverty reduction strategy. This is because MFIs are more flexible than their formal financial counterparts. SMEs account for the employment of at least 57 percent of the productive population in Zimbabwe.