RBZ call to move to productive loans bears fruit

THE Zimbabwe Association of Microfinance Institutions (Zamfi) has applauded its members' efforts to adhere to the Reserve Bank of Zimbabwe's calls to promote productive loans rather than consumer lending.

In an interview, Zamfi executive director Mr Godfrey Chitambo said productive lending by MFIs has been on the increase since 2015.

"In terms of productive lending for the last three years, the sector has effectively responded to calls from RBZ to move from consumer lending to productive lending. There has been an upsurge in terms of loans because banks are failing to meet the demand for loans hence people are coming to us for loans," said Mr Chitambo.

According to Zamfi's 2017 third quarter performance report, the central bank's statistics show that the microfinance sector currently represents six percent of the total loan book in the financial sector.

While the sector performed dismally during the first six months of 2017, it is now showing signs of recovery as indicated by the growth in client loans during the quarter June to September 2017. Quarterly loan disbursements went up by 9,6 percent ($4,9m) during June to September 2017, compared to 3,6 percent ($1,6m) for the previous quarter period of March to June 2017.

The value of loans outstanding amounted to $106 million as at 30 September 2017.

Mr Chitambo said most MFIs use money which they independently source while banks use depositors' funds hence, MFIs have to ensure that collection of loans is efficient.

"Banks can be sitting at 89 percent in terms of loan collection while MFIs normally prefer 95 percent and above to guard against collapsing," he said.

He added that Zamfi was in the process of lobbying for three-year operating licences in a bid to increase investors' confidence in the sector.

"We have made representations and are in agreement with the central bank and Ministry of Finance and Economic Development on what needs to be done on the licensing issue. Currently, MFIs are being issued with one-year licenses and this is a challenge because an MFI can give out a loan payable in three years yet its operating licence lasts for one year.

"We have been assured that both the ministry and RBZ are looking into this and we are on the verge of finalising amendments to the Microfinance Act. Hopefully, after the discussions, our members will be able to get three-year licences. If the licence duration is extended, our members will be able to woo investors. No investor is willing to pour money into an MFI with a licence which expires after a year because returns will be minimal. Prolonging the licence duration will bring about positive impacts," said Mr Chitambo.

He also highlighted that the microfinance sector experienced brain drain in 2008 and 2009 and this resulted in a skills gap.

He added that Zamfi has since partnered with tertiary institutions to cover the gap.

"In 2008 and 2009, our sector almost collapsed such that most of our seasoned practitioners migrated to Lesotho, Zambia, Swaziland, Tanzania, Ghana and Nigeria in search for employment opportunities. In 2010, we noticed that for us to rebuild the sector, it was critical for us to have people with requisite skills in place.

"MFI employees need to have some technical skills on the fundamentals of the sector. This resulted in us noticing that, in Zimbabwe, there was no course in microfinance and five years ago, we began approaching and engaging universities. We started with the Midlands State University, followed by the National University of Science and Technology and University of Zimbabwe. We wanted to plug the skills gap and we have since managed to partner with Nust's Centre for Continuing Education and University of Zimbabwe to introduce the Professional Certificate in Microfinance and Entrepreneurship course. Uptake of the course in Harare and Bulawayo so far is satisfactory," he said.