The ManicaPost
Business Correspondent —
MICRO-FINANCE institutions should come up with viable and attractive packages tailor-made for the current economic environment so as to adapt to the 10 percent interest rate directive by the Central Bank, a MFIs expert has said.
Reserve Bank of Zimbabwe Governor, Dr John Mangudya, capped interest rates at 10 percent for MFIs in his last year’s mid-term Monetary Policy Statement as a measure to bring sanity into the sector that had seen astronomical interest rates of over 20 percent per month.
Having negotiated for a delay in the implementation of the directive which was set for the first of October last year, the MFIs sector has as of last week complied with the directive, amid concerns that smaller MFIs are more likely casualties from the development since they do not command large loan portfolios.
In a telephone interview with Business Post, Zimbabwe Microfinance Fund (ZMF) managing director, Mr Brian Zimunhu, said the interest rate cap was a positive development for the benefit of business in an economy facing liquidity and cash challenges to foster production, but would need innovative thinking for MFIs to adapt in coming up with viable yet attractive packages to the market.
“The 10 percent interest rate for the sector players have been given a nod and we have parameters that we have considered which can still make business viable, however, there are other issues; like we foresee that smaller MFIs may struggle but bigger one are already doing better,” he said.
He said the major constrain was limited funding for most MFIs which was creating a situation where the few with cash would charge exorbitant interest rates.
He said they were undergoing an exercise with their offices across the country to have an appreciation of compliance with the rates put in place by the regulator.
He also said the funding challenges were also affecting ZMF, a fund formed to address the pressing need to capacitate the MFIs sector in the country which had crumbled at the height of 2008 economic meltdown.
“We have set US$10 million for cumulative on-lending to MFIs for the current year in the face of funding constraints. The demand for loans is very high and the MFIs sector growth should help marginalised groups to acquire start-ups for various projects,” he said.
This, however, raises concerns about the debate that MFIs were not fully giving attention to these vulnerable groups as there have been reports that most of them prefer pay-slip based lending in an economy highly informal. To accentuate the notion, research showed that the large chunk of loans disbursed in the MFIs sector in 2016 went to the retail sector which hosts a privileged section of society while agriculture followed.
