Microfinance institutions (MFIs) have remained stagnant since dollarisation, due to liquidity challenges facing the country.
Zimbabwe Association for Microfinance Institutions (Zamfi) president Godfrey Jokonya said the performance of the sector was very poor because MFIs were struggling to raise capital.
“There may be some few new money lenders coming onto the market with substantial resources, but the majority are still fighting to keep afloat,” he said.
“Many MFIs are struggling to recover from capital erosion, having lost their funds during hyperinflation.
“Unlike banks that have to depend on depositors’ funds, MFIs have to borrow from somewhere for working capital.
“This has been the challenge since the introduction of multi-currency.
“As a result, the first five months of this year have not been any better than the period from February 2009.”
The country’s total banking deposits are at $4 billion while $3 billion was believed to be in the informal sector.
Since the introduction of multi-currencies in 2009, the country has failed to attract any finances from outside.
There are 157 MFIs in the country compared to 900 in 2004, when the sector was at its peak.
Jokonya said MFIs were reaching out to less than 20% of customers they reached during the peak period and were operating at 50% of their capacity.
He said sourcing of funds remained the main challenge for the sector as development partners were not providing finance to the sector.
“Banks at the moment are mainly focusing on short-term loans (also due to the short-term nature of deposits), and as a result cannot advance long-term lending to MFIs,” he said.
“At the same time we also do have some banks that are hostile towards MFIs, whom they consider as competitors, but this is baseless.”
MFIs require viable income generating projects while others are concerned about collateral, but generally, requirements vary from institution to institution.
According to a FinScope Consumer survey conducted by the Finance ministry, ZimStat, Finmark Trust and others in 2011, 80% of Zimbabweans earn $200.
The survey indicated that people use informal mechanisms for savings, insurance and borrowings with 14% of adults using informal mechanisms to borrow money.