MICROCAPITAL STORY: Chairperson of Zimbabwe Microfinance Institutions (ZAMFI) calls for Microfinance Institutions (MFIs) in the Region to Re-Strategize in order to Improve Growth; Calls for Establishing a National Fund for MFIs

Microfinance Institutions (MFIs) in Zimbabwe have been asked to revisit their operational and financing strategies to improve growth of the country’s microfinance sector. According to a press release on the Zimbabwean newspaper The Chronicle, the call for re-strategizing was made by Ms. Mandas Marikanda, board chairperson of the Zimabawe Association of Microfinance Institutions (ZAMFI). Ms Marikanda was quoted as saying that it was crucial for MFIs have to ‘refocus’ their businesses and to specifically identify appropriate options for recapitalization. (The Chronicle is managed by Zimbabwe Newspapers Ltd., a printing and publishing company in Zimbabwe).

In an effort to promote recapitalization of MFIs, the ZAMFI is lobbying for the setting up of a national fund for MFIs in the region. According to Ms. Marikanda, this fund would aid ZAMFI’s member MFIs in securing working capital. Commenting on the establishment of the fund, Ms. Marikanda said ZAMFI was working with donor organizations to ‘rescue’ the country’s microfinance sector through the provision of funds which would aid MFIs in offering loans. Ms Marikanda also called for MFIs to categorize their client base in order to effectively identify client who need to be served. Further, the release also quoted Ms Marikanda also saying that ZAMFI was working on the modalities for a plan under which microfinance firms would also offer housing loans to home seekers. No further information on the housing loan scheme is currently available.

Capital and viability concerns have been issues plaguing the Zimbabwean microfinance sector over the recent past. According to Dr Gideon Gono, Governor of the Reserve Bank of Zimbabwe, viability concerns have forced a significant number of MFIs in Zimbabwe to cease operations and surrender their licenses. As per a 2008 half-year monetary policy statement, out of a cumulative 309 registered institutions only 150 MFIs in Zimbabwe were operational. A 2008 report by AllAfrica.com quoted an industry official as citing the escalating cost of borrowing and hyperinflationary environment as reasons why money lenders and MFIs in Zimbabwe struggle to survive. Thus, MFIs in the region charge high interest rates and this either tends to ward off potential borrowers or increases bad debt as borrowers find the loans, which are required by law to be in local currency, to be increasingly difficult to repay.

Another factor contributing to the challenges faced by MFIs in Zimbabwe is the new minimum capital requirements enforced in the country, effective August 2008. Under this requirement, all money lending institutions in Zimbabwe need to hold a minimum capital of USD 5000. Explaining the importance of the relatively small minimum amount, an industry official was quoted by the 2008 AllAfrica press release as stating the amount was ‘a lot’ considering  subdued business for the country’s microfinance industry. As per the 2008 release on AllAfrica.com, many MFIs in Zimbabwe are expected to cease operations following the enforcement of this new requirement.

The Zimbabwe Association of Microfinance Institutions (ZAMFI), chaired by Ms. Mandas Marikanda, was established in 1999 to provide a platform for advocacy for MFIs in Zimbabwe and to help integrate the microfinance sector into the country’s financial system. ZAMFI represents and lobbies for the country’s microfinance industry in matters relating to policy and regulatory environment for MFIs. It also acts as a unifying body to promote and represent the interests of Zimbabwean MFIs with donor agencies, financial sector institutions and government bodies. No information on its member organizations is publicly available. ZAMFI does not maintain a web presence.

By Bharathi Ram, Research Assistant

Additional Resources:

Chronicle: Zimbabwe MFIs asked to re-strategize

AllAfrica.com: Zimbabwe microfinance institutions hit by viability concerns

MIXMarket: ZAMFI

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