Zamfi agrees to cap lend­ing rates

Chronicle (Zimbabwe) - - Business - Oliver Kazunga Se­nior Busi­ness Re­porter

THE Zim­babwe As­so­ci­a­tion of Mi­cro­fi­nance In­sti­tu­tions (Zamfi) has agreed to cap lend­ing rates to a max­i­mum of 10 per­cent per month with ef­fect from Oc­to­ber 1, 2016 in line with a Re­serve Bank di­rec­tive.

In his Mid-Term Mon­e­tary Pol­icy State­ment last week, Re­serve Bank of Zim­babwe (RBZ) Gover­nor Dr John Man­gudya said mi­cro­fi­nance in­sti­tu­tions should lower their in­ter­est rates so as to ful­fil their strate­gic role in the Na­tional Fi­nan­cial In­clu­sion Strat­egy.

He said this was also meant to fos­ter sus­tain­able eco­nomic de­vel­op­ment.

In a writ­ten re­sponse to ques­tions from Busi­ness Chron­i­cle, Zamfi ex­ec­u­tive di­rec­tor Mr God­frey Chi­ta­mbo yes­ter­day said:

“As an as­so­ci­a­tion, we’ve a very strong pol­icy on en­gage­ment. The RBZ has been li­ais­ing with us for the past three months or so on this (lend­ing rates re­duc­tion) as­pect and we sub­mit­ted our rec­om­men­da­tions.

“We be­lieve there is need to main­tain a balance between en­sur­ing that clients get ser­vice at an af­ford­able cost and on the other hand en­sures the con­tin­ued oper­a­tions of MFIs on a sus­tain­able ba­sis. That is the ba­sis of our en­gage­ment with the Cen­tral Bank.”

Mr Chi­ta­mbo said for a long time since 2010, the in­ter­est rates have been between five per­cent and 20 per­cent per month for many MFIs.

“Of late some have moved to as low as 2.5 per­cent per month,” he said.

Dr Man­gudya high­lighted that the RBZ is also con­sid­er­ing ex­tend­ing li­cences from the cur­rent one year, a de­vel­op­ment, which Mr Chi­ta­mbo said would bring re­lief to MFIs who have in the past been treated dif­fer­ently from their bank­ing coun­ter­parts who have per­pet­ual li­cences.

“The cur­rent one year li­cence re­newal is in­deed highly pro­hib­i­tive to MFIs with a long-term pro­gramme of ad­vanc­ing credit to the marginalised com­mu­ni­ties.

“Once the one year li­cence is done away with, the sec­tor shall def­i­nitely be­gin to see MFIs sup­port­ing more in­come gen­er­at­ing projects that re­quire fund­ing for longer pe­ri­ods.

“In ad­di­tion, the sec­tor will at­tract fund­ing from in­ter­na­tional investors who nor­mally pre­fer to work with MFIs on a longer term ba­sis,” he said.

As at Au­gust 31, 2016 the mi­cro­fi­nance sec­tor was made up of four de­posit tak­ing MFIs and 164 cred­i­tonly in­sti­tu­tions.

Ac­cord­ing to RBZ, to­tal loans for the sec­tor as at June 30, 2016 was $183.4 mil­lion with the level of NonPer­form­ing Loans (NPLs) presently at 9.88 per­cent, a de­clin­ing trend from 13.31 per­cent recorded last year in June.

The MFI sec­tor tar­gets to erad­i­cate poverty and pro­mot­ing eco­nomic de­vel­op­ment among low-in­come house­holds and small and medium en­ter­prises — @ okazunga.

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