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The Reserve Bank of Zimbabwe (RBZ) says micro-finance institutions have lost their way as they are concentrating on maximising profit and need re-orientation to ensure they focus on supporting marginalised people living in rural areas to promote financial inclusion.
RBZ Deputy Governor, Dr Charity Dhliwayo told micro-finance sector executives at the inaugural Zimbabwe Association of Micro-Finance Institutions (Zamfi) summer school in the resort town of Nyanga that micro-finance institutions (MFIs) were an integral, developmental part of the financial sector.
The two-day summer school held last weekend ran under the theme: “Re-defining micro-finance”.
According to the central bank, Zimbabwe had 155 registered MFIs with 417 branches countrywide as at the end of September 2015, with their basic role being to extend small, short term loans to consumers.
Experts, however, note that there remains a large number of MFIs which are operating informally.
“We have since noticed that overtime, MFIs have largely drifted from their original intent as profit maximisation has become the main focus,” Dr Dhliwayo said.
“The gradual reduction in donor funding and subsidies over the years has contributed to the current mission drift by MFIs. Some of the MFIs might also not quite understand their core functions.”
Dr Dhliwayo said the primary mission of MFIs was to lend to the poor, marginalised groups as well as those who do not qualify for traditional bank loans for income generating purposes and poverty alleviation.
“This mission drift has been seen where MFIs are focusing mainly on urban salaried individuals,” she said.
“The mission drift is typified by focus on the less risky sectors, urban areas, those who have salaries, as well as less outreach with those living in the outer areas excluded.”
It was also critical that the loans focus more on productive sectors than consumption, she said.
MFI registrar at the RBZ, Norman Mataruka said RBZ statistics showed that about 89 percent of the institutions were operating in Harare and Bulawayo.
“The people who are supposed to be targeted (by MFIs) in the rural areas do not have access,” he said, adding traditional banks were reluctant to go outside urban areas and MFIs should take advantage of the gap to spread their tentacles.
As at the end of September this year, the institutions had extended loans amounting to $173 million.
Mr Mataruka said it was critical that MFIs improve their corporate governance and management styles to ensure their operations outlived their founders.
“My files are always full of complaints from borrowers,” the RBZ director said, adding that some of the institutions were also charging exorbitant interest rates which made it impossible for borrowers to get out of debt.
Zamfi chairman, Patrick Mangwendeza lauded the institutions for having remained in operation even when the Zimbabwean economy went through turbulent times in the period ending 2009.
The sector continues to build around the vision to eradicate poverty,” he said, adding stakeholder support was also critical in ensuring the sector played a meaningful role in supporting the drive to ensure the bulk of Zimbabweans have access to financial services. – New Ziana.
Online Reporter