Microfinance firm gears for growth
MICROFINANCE lender, Lic Finance Private Limited says it is targeting a 100 percent growth on its loan book from the current $500 000 to $1 million by year end as it seeks to increase lending to the growing small to medium enterprises and civil servants.
Within the next two years, the financial institution is also planning to launch into the region while pursuing bank status.
The firm is lending mostly to budding entrepreneurs streamlined from the main stream banking industry, efforts that meet up with the broader economic development agenda under the economic blue print Zim-Asset, that of boosting individual enterprise.
According to the National Microfinance Policy, microfinance is the provision of a range of financial services, including savings, small loans, insurance and money transfer services to marginalised members of the population and SMEs that do not have access to finance from formal financial institutions.
In 2016 Lic Finance lended over $300 000 to the market, which has grown to around 7 percent since it opened doors barely two year ago.
“Our main objective is to create wealth,” said managing director Mr Lican Mlambo in an interview with The Herald Business.
“We look at viable projects and follow up on them with our team offering technical expertise to ensure they are successful.
This is our way of growing the SME sector and assist civil servants who do not have access to financing from big banks,” he said.
Lic Finance offers salary based loans to civil servants and SMEs at a 9 percent per month interest rate.
MFIs assist in the formalisation and integration of the informal sector thereby facilitating economic growth and development.
While non performing loans have been a burden for financial institutions in Zimbabwe, Mr Mlambo said Lic Finance enjoys a clean balance sheet, thanks to its client base and relatively smaller size of the institution.
Last year, the Reserve Bank of Zimbabwe capped interest rates for microfinance institutions at 10 percent per month effective October 1, 2016.
Some MFIs had been charging interest rates as high as up to 20 percent per month, stifling access to funding by SMEs and traders.
“We have no issues with NPLs. We deal with civil servants, Government pays and in turn we recover our money. This is also the advantage of being small,” he said.
Apart from loans for business projects, the micro-finance lender also offers instant short term loans for basic home upkeep.
Without permanent access to institutional microfinance, poor households rely on meagre self finance or risky and expensive informal sources of finance thus limiting their ability to actively participate in development opportunities.
Mr Mlambo said: “We understand our role of bridging the gap left out by banks in providing emergency loans for medical bills, food, funeral expenses and other day to day emergencies that may arise.”
MFIs have been identified as a key pillar for the National Financial Inclusion Strategy in the country and a tool for effective poverty reduction.
In line with this, Government is also planning to establish an MFI targeting the unbanked as part of efforts to enhance financial inclusion, a strategy that seeks to improve the number of financially included SMEs to 80 percent by 2020.