Money lenders hit by de­faults

Sunday News (Zimbabwe) - - Front Page -

MICROFINANCE In­sti­tu­tions (MFIs) are strug­gling to cope with the high num­ber of loan delin­quency and de­faults by bor­row­ers largely due to poor fi­nan­cial man­age­ment prac­tices be­ing ac­cel­er­ated by a myr­iad of eco­nomic chal­lenges pre­vail­ing in the coun­try.

Zim­babwe As­so­ci­a­tion of Microfinance In­sti­tu­tions (Zamfi) ex­ec­u­tive di­rec­tor Mr God­frey Chi­ta­mbo said MFIs were also be­ing af­fected by a myr­iad of chal­lenges af­fect­ing other sec­tors of the econ­omy.

“MFIs just like other com­pa­nies have been per­form­ing as best as they can, given the chal­lenges such a cash short­ages, low in­vest­ment in­flows into the coun­try and high cost of do­ing busi­ness, among oth­ers,” said Mr Chi­ta­mbo.

He said the high loan non-pay­ment rate was also ad­versely af­fect­ing MFIs’ vi­a­bil­ity.

“The par­tic­u­lar chal­lenges for MFIs are clients over-in­debt­ed­ness, in­for­ma­tion asym­me­try and lack of col­lat­eral by bor­row­ers. The RBZ (Re­serve Bank of Zim­babwe) has how­ever, in­tro­duced the Credit Registry as well as the Col­lat­eral Registry in a bid to re­duce these chal­lenges. Once these are well es­tab­lished these chal­lenges will be min­imised,” said Mr Chi­ta­mbo.

He also said the high cost of do­ing busi­ness in the coun­try has con­trib­uted to the poor per­for­mance com­pared to other coun­tries in Africa.

“The in­dus­try also still faces high cost of do­ing busi­ness es­pe­cially when they spread out to ru­ral ar­eas as the cost of out­reach re­mains high de­spite the de­vel­op­ment in ICT (In­for­ma­tion and Com­mu­ni­ca­tions Tech­nol­ogy).

“The sec­tor still has a long way to go in or­der to catch up with MFIs in Africa and this will re­quire con­tin­ued sup­port from pri­vate sec­tor, pub­lic sec­tor and the donor com­mu­nity in or­der to come up with mod­els that are ef­fi­cient and have im­pact,” said Mr Chi­ta­mbo.

He said MFIs’ prof­itabil­ity es­pe­cially for those of­fer­ing ser­vices to fi­nan­cially ex­cluded clients has re­mained largely sub­dued, ow­ing to huge op­er­a­tion cost and lack of di­ver­si­fied in­come over the years.

“Im­prove­ments have been noted to those MFIs that pro­vide fi­nan­cial ser­vices for those that are salaried or have reg­u­lar in­come through the use of tech­nol­ogy as these op­er­a­tions can be stan­dard­ised around tech­nol­ogy.

“How­ever, for those MFIs that work with peo­ple who are fi­nan­cially ex­cluded and mostly in ru­ral Zim­babwe, the cost of reach­ing out to these clients re­mains pro­hib­i­tive and there is need to con­tinue to look at ways to re­duce the cost of out­reach,” said Mr Chi­ta­mbo.

He, how­ever, said there was a need for Gov­ern­ment to in­tro­duce a new raft of in­vestor favourable poli­cies so as to turn around the econ­omy, with the rip­ple ef­fects likely to spur the per­for­mance of the sec­tor.

“The in­dus­try is ex­pected to im­prove once good poli­cies are in­tro­duced by Gov­ern­ment to steer the econ­omy to­wards re­cov­ery of all sec­tors es­pe­cially min­ing, agri­cul­ture, and tourism and in­fra­struc­ture de­vel­op­ment af­ter the elec­tions. The RBZ been very sup­port­ive of the sec­tor com­ing up with fund­ing that MFIs can ac­cess in or­der to reach out to fi­nan­cially ex­cluded in­di­vid­u­als,” said Mr Chi­ta­mbo.

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