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Oliver Kazunga Senior Business Reporter
THE number of microfinance institutions (MFIs) is projected to continue increasing on the back of lack of credit access in the conventional financial services.
In a quarterly report ending March 31, 2014, released by the Reserve Bank of Zimbabwe the number of licensed microfinance institutions grew from 213 in 2005 to 309 in 2007.In 2008, the number of operating MFIs plunged to near zero as hyperinflation decimated the institutions’ balance sheets.
However, the number of operating MFIs has been gradually increasing following the adoption of the multicurrency system in February 2009.
In 2009, the number of MFIs registered with the central bank stood at 95 before it increased to 114 in 2010. In 2011 they were 146 registered MFIs while in 2012 the figure stood at 150.
However, last year the number went down to 143 before increasing to 153 as of March 31, 2014.
“As at March 31, 2014 there were 153 registered MFIs under the supervision of the Reserve Bank. During the quarter four new microfinance licences were issued and 27 microfinance institutions renewed their licences,” said RBZ.
Zimbabwe National Chamber of Commerce chief economist Kipson Gundani said since the adoption of the multicurrency system the number of MFIs has been on an upward trend as the economy was still skewed towards the informal sector where access to credit in the conventional banking systems was limited. “The whole issue as to why the number of MFIs continues to increase is largely bent on the credit access as the informal sector cannot borrow from the mainstream banking system due to issues such as high collateral required in the banking sector,” he said.
“Unless the economic fundamentals are corrected meaning if the economy gets sufficient credit lines the number of MFIs will go down.”
An economic commentator Wendy Mpofu concurred with Gundani adding that the upward trend in the number of MFIs was likely to continue increasing for as long as the economy remained tilted towards the informal sector.
“MFIs are flourishing because a liquidity crisis continues to haunt the economy resulting in the institutions charging interest rates as high as 200 percent per annum,” she said.
Another economic commentator, Peter Mhaka said that MFIs were owned by individuals that were able to easily access off-shore funding to finance the operations for their entities.
Microfinance institutions continue to be concentrated in the urban centres.
The central bank said MFIs play a critical role in the process of building inclusive financial systems for inclusive growth and development.
By the end of the first quarter, MFIs total loans stood at $170 million compared to $164.20 million as of December 31, 2013.
Total assets were at $193.87 million as at March 31, 2014 compared to $185.73 million for the quarter ending December 31, 2013.
“The sector has remained largely dominated by ten microfinance institutions which controlled 83.76 percent of the market share in terms of total loans as at 31 March 2014. The largest microfinance institution had a total loan book of $54.01 million and total assets of $52.20 million,” said RBZ.
Despite posting satisfactory performance, the MFI sector continues to face funding constraints largely attributable to general liquidity constraints in the economy and limited availability of wholesale funds.
High interest rates charged by the MFIs have precipitated a high level of indebtedness among the microfinance clients which has the undesirable effect of negating the financial inclusion objective of microfinance.
Online Reporter