MFIs poised to drive economic growth
THE Reserve Bank of Zimbabwe (RBZ) believes that microfinance institutions (MFIs) will likely spur local economic growth in the near term as they are gradually replacing the traditional intermediary role of formal banks, especially in supporting marginalised groups.
Most women, youths and the rural population remain unbanked due to bureaucratic loan application systems, including high interest rates and service charges by commercial banks.
The 2014 FinScope Consumer Survey revealed that 23 percent of Zimbabweans are still financially excluded, with the most affected groups being micro, small and medium enterprises; women; the rural population and small-scale farmers.
Speaking at the Microcred Zimbabwe launch on Tuesday last week, RBZ Deputy Governor Dr Charity Dhliwayo said the entrance of companies like Microred - former MicroKing, a subsidiary of AfrAsia bank which is currently under liquidation - will not only help increase foreign direct investment but also assist the needy rural population.
“The coming on board of Microcred and AfricInvest has opened doors to the much needed foreign investment into the microfinance sector in Zimbabwe, which in turn will facilitate the empowerment of the previously marginalised groups.
“The benefits of financial inclusion are strongly rooted in the empowerment of the marginalised, and by empowering individuals and families to cultivate economic opportunities, microfinance has proved to be a powerful agent for strong and inclusive growth. In this regard, Zimbabwe has embraced financial inclusion and initiated deliberate programmes to provide structured guidance for successful implementation of the financial inclusion agenda,” said Dr Dhliwayo.
Through the financial inclusion strategy, the central bank targets to improve access to affordable and appropriate formal financial services within the country from 69 percent recorded in 2014 to at least 90 percent by 2020.
The number of banked adults will also be increased from 30 percent in 2014 to 60 percent by 2020.
Accordingly, the RBZ has since set up the Microfinance Thematic Working Group, whose main objectives is to explore the development of innovative microfinance products that leverage on technology in order to increase microfinance outreach at affordable lending rates.
Finance and Economic Development Minister Mr Patrick Chinamasa, who officially launched Microred Zimbabwe, said the new group was likely to improve support to small and medium scale enterprises.
“It is my hope Microcred Zimbabwe will also explore and embrace financial innovation and ingenuity to deploy on technology in its service delivery model.
“This should certainly leverage the brick and mortar footprint and guarantee a winwin and sustainable business model that will result in deeper penetration in the quest to support the informal sector, both in urban and rural Zimbabwe.
“A stronger SME sector can bolster the country’s resilience by broadening and diversifying the domestic economy, thereby reducing its vulnerability to sector specific shocks, both externally and internally induced,” said Mr Chinamasa.
The relaunched entity is confident of regaining its lost market share through leveraging on interest rates as low as 5 percent compared to an industry average of 25 percent.
It is believed that the microfinance institution will be supported by financial and technical resources from France-based Microcred Group and Tunisia-based AfricInvest Financial Sector Fund.
The two firms, with over US$1 billion worth of assets, are reportedly planning to pump over US$20 million into the Zimbabwean micro-lender in the next two years as well as upgrade it into a microfinance bank. Microred Zimbabwe’s acting chief executive officer Mr Lloyd Borerwe said the MFI will reclaim its space in the lending sector. So far Microcred Zimbabwe has opened nine branches and recruited 40 people.
The Zimbabwe unit adds to other subsidiaries in Senegal, Nigeria, Cote d’Ivoire, Madagascar, Mali, Tunisia, Burkina Faso and China. Microcred owns 70 percent of the local business while AfricInvest owns the remainder. AfricInvest is a pan-African private equity fund manager, managing over US$1 billion investments across the continent.