adminAt the moment, the Reserve Bank of Zimbabwe issues one-year trading licences to micro-finance institutions, a development that operators say was stifling prospects to secure long-term financing from their funders.
Officials from micro-finance institutions said the licences should have a validity period of at least three years.
“Currently, we are not happy with the one year tenure licensing because it tends to limit us from the prospects of getting funding from potential financiers.
“This is a big issue that we are facing as Zamfi because capital cannot move into the sector,” said an official at a workshop to discuss the proposed Micro-finance Bill in Bulawayo last week.
The extension of licensing tenure, Zamfi said, would also result in the birth of micro-finance banks in the country, a move that will see the sector growing and contributing more to the economy.
Another official said Zimbabwe was the only country with a short licensing tenure making it difficult for the local micro- finance institutions to perform well in an environment where the liquidity situation was tight.
“With a one year licensing tenure our funders don’t have the confidence to avail loans to fund our operations as we cannot make sound profit within a short space of time,” he said.
Players in the micro-finance sector also expressed concern over a section in the draft bill that calls the firms to meet expenses of whatever investigations the regulator would undertake on them.
The business executives argued that in the event an institution is found guilty, penalty charges to be instituted by the regulator should cover all the expenses incurred during the investigations.
The country’s micro-finance sector is faced by challenges that included funding constraints and reputational issues.
The RBZ withdrew trading licences of McDowell’s and All Angles money lending institutions for unethical business practices.
In an interview, after the meeting Zamfi board chairperson Mr Clive Msipa urged their members to desist from engaging in unethical business practices.
“Obviously, as an association we advice our members to desist from misconduct and in the event that they are found on the wrong side we will sanction them,” he said.
He said the absence of long-term licensing for micro-finance institutions was also one of the major reasons that has seen the institutions charging high interest rates.
Concerns has been raised that some of the money lending institutions were charging interest rates as high as 40 percent, a development which economic analysts have said was punitive to borrowers.
derick.khumalo