Zimbabwe: Microfinance Institutions Hit by Viability Concerns

Aug 2008
Zimbabwe, August, 05 2008 - Microfinance and money lending institutions have been hard hit by viability concerns that have seen many of them closing shop.

According to 2008 half-year monetary policy statement, out of a cumulative 309 registered institutions only 150 were still operational.

Reserve Bank of Zimbabwe governor, Dr Gideon Gono said a significant number of these institutions had since ceased operations and surrendered their licences.

Some officials within the sector have blamed the woes of the industry on declining business influenced mainly by the hyperinflationary environment.

"You would appreciate that the cost of borrowing money has been escalating on a daily basis and because we are operating in a hyperinflationary environment it has become increasingly difficult to get clients who come in to borrow.

"In instances where they do come in they are put off by the high interest rates because these have to be constantly reviewed to enable the industry to succeed," said an industry official.

The official added that they had also been affected by rising bad debts as borrowers were increasingly finding it difficult to repay.

Many more institutions were likely to fold following the unveiling of new minimum capital requirements.

Money lenders and microfinance institutions are expected to hold a minimum capital of US$5 000 by August 31.

"This might appear to be a small amount to others but in this line of business it is a lot considering subdued business," said another official.

Source : The Herald

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