adminbring stability in the sector where a number of companies have been involved in unethical and illegal conduct.
The RBZ earlier this month said it would raise the minimum capital requirements for micro-finance institutions from US$25 000 to US$5 million to try and protect the public.
Speaking to journalists in Harare last week, ZAMFI board chairman Mr Clive Msipha said the capital requirements coupled with the passing of the Micro-Finance Bill into law would bring a stable legislative landscape for the industry.
“Allowing market forces to determine interest rates is very fair because the competition that exists on the market would guarantee the reduction of interest rates by the institutions,” he said.
In the past MFIs have been reportedly charging interest rates as high as 40 percent per month mainly because interest rates charged by money lenders have not been regulated since the advent of the multi-currency system.
“The industry had been operating without a proper regulatory framework and this had increased cases of exorbitant interest rates.
“Currently, the industry is governed by the Moneylenders and Rates of Interest Act but the Micro-Finance Act will raise the bar for practitioners and the industry and MFIs will start adhering to micro-finance best practices,” he said.
The Micro-Finance Bill which has passed through Parliament is set to go to Senate on June 4 before being sent to the President for his assent.
Mr Msipha said the passing of the Bill into law would usher in micro-finance banks that would address issues of delivery of financial inclusion more thoroughly.
He said micro-finance banks had the potential to be huge as they were able to penetrate other sectors of the economy that commercial banks had not gone into.
“They recognise the needs of the target market and exploit technology to give service in the most efficient manner. Currently, it is estimated that 18 percent of people have access to formal banking and financial services, compared to the telecommunications industry with penetration of over 95 percent, which shows that the financial services industry still has a long way to go.
“Micro-finance will offer banking services to market segments that the current commercial banks are neglecting,” said Mr Msipha.
He added that the proposed new Act would result in increased investment into the sector, and this would ultimately result in lower interest rates in the sector, increasing funding to small business and consequently an increase in economic activity and job creation.
Online Reporter