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He said a recent research conducted by RBZ showed that some MFI’s were engaging in salary-based lending which resulted in some civil servants taking home as little as $20 per month after loan deductions by banks and MFI’s.
“The bureau will collect, manage and disseminate customer information to money lending institutions so they avoid such a scenario whereby individuals take home $20.
“Through the bureau, money lending institutions will be able to make accurate decisions based on client’s credit history so as to reduce risk and avoid cases of fraud,” he said.
He added that MFI’s must protect their clients from over-borrowing.
“Money lending institutions,” he said, “should practise core client protection practices which prevent clients from over-borrowing and accessing money to purchase products that they have no need for, which results in clients failing to pay back loans.
“MFI’s have to be fully transparent by providing clear terms and conditions of all financial transactions to clients and have complaint resolution procedures since they are in the business of assisting the public,” he said.
He urged money-lending institutions to form associations with financial institutions and share information such as customer credit behaviour and assist each other to keep abreast of changes in the banking sector.
Meanwhile, Mr Mataruka warned MFI’s against taking deposits from clients and using abusive debt collection practices.
He said MFI’s should comply with the Banking Act.
“The Reserve Bank of Zimbabwe will enforce punitive measures which include cancellation of the operating licence of MFI’s which do not adhere to set regulations that determine the code of conduct for MFI’s,” said Mr Mataruka.
He said a research carried out on all micro-finance and money-lending institutions by the RBZ in September, found that most MFI’s do not have proper governance structures and were not adhering to regulations.
“We found that eight of the MFI’s were taking deposits in violation of Section 5 of the Banking Act which prohibits any person from taking deposits except registered banking institutions.
“MFI’s should refrain from illegal business practices like mobilising deposits in the guise of preference shares,” he said.
Mr Mataruka said all registered MFI’s should have a complaint charter and procedure so that in cases when a customer feels that he or she is not satisfied with the service rendered there is set procedure to solve the grievance. Money lending institutions should inform the RBZ of changes in senior management and in the case of relocation of premises, since such changes require the registrar’s approval.
“The deliberate misrepresentation in regulatory reporting characterised by falsification and dishonest information especially in licences including failure to submit quarterly returns due to unavailability of IT system or lack of training may result in punitive measures being put in place,” he said.
Mr Mataruka said some MFI’s were employing unethical debt collection practices with some clients made to sign agreements of sale of collateral assets at loan disbursement stage, so when they default, the institution transfers right of ownership without consulting clients.
“In terms of the law of Zimbabwe disposal of pledged collateral can only be disposed after obtaining a writ of execution from the courts,” he said
He urged MFI’s not to charge punitive interest rates by incorporating duplicated charges such as application fees, administration fees, processing fees and insurance fees.
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