Zimbabwe: Micro-Finance Institutions Rise Out of the Ashes
Zimbabwe, September, 08 2014 -
The sector, which was virtually non-existent five years ago, has in the past few years been rising out of the ashes, with the Zamfi membership growing gradually from 95 in 2009 to the existing 153.
The Zimbabwe Association of Microfinance Institutions said on Thursday its members have extended over $170 million in small loans in the first half of the year despite the liquidity crunch that the country is experiencing, which has hit the sector hard.The sector, which was virtually non-existent five years ago, has in the past few years been rising out of the ashes, with the Zamfi membership growing gradually from 95 in 2009 to the existing 153.
Zamfi chairman Patrick Mangwendeza told journalists the sector was "performing well" but had been hit hardest by the current liquidity crunch the economy was facing.
"The liquidity constraints have affected micro-finance institutions to a very big extent. If it is affecting commercial banks to the extent that we have seen, it would be worse with MFIs but fortunately several interventions have come into the market," he said.
Mr Mangwendeza said the institutions were surviving from funds borrowed from banks as well as extended by donors.
The MFIs loan book has gradually grown from $97 million in June last year, to $164 million at the end of 2013 to the current $170 million.
Of the $170 million, only 9 percent was directed towards productive use while the rest was consumptive borrowing.
Mr Mangwendeza said the sector was also struggling with non-performing loans, which were averaging 30 percent of the loan book.
He attributed the NPLs to the high interest rates that MFIs charged, which he, however, defended as justifiable given the high administrative costs incurred in following up loan repayment from a big base of clients.
"It is very expensive to administer small loans than the big ticket loans," he said.
Statistics that Zamfi provided show that women account for 63 percent of MFI clients, taking up the bulk of the credit.
Zamfi executive director Godfrey Chitambo said women were good borrowers as they paid back their dues.
Meanwhile, Mr Mangwendeza said most MFIs had not graduated into deposit taking micro finance banks, which the Reserve Bank have allowed to operate, due to capital constraints.
Some also opted not to upgrade their licenses to avoid scrutiny by the central bank.
The micro banks are required to have a minimum capital threshold of $5 million.