CONSUMPTION accounted for over 70% of the loans given by Microfinance Institutions (MFIs) in the first quarter of the year, a new report has shown.
TARISAI MANDIZHA
In a quarterly report on MFIs done by the central bank, 71,2% of the $170 million worth of loans granted went for consumption purposes, from the registered 153 MFIs, with remainder catering for productive purposes.
Under normal circumstances, the bulk of the loans should be channelled to the productive sector and not on consumption.
The current state of affairs reflects the sorry state of the economy where lenders prefer salary-based loans to individuals or corporates.
According to the MFI industry quarterly report, the highest numbers of MFIs are largely concentrated in the urban centres as compared to rural and peri-urban centres with 107 MFIs in Harare, 21 in Bulawayo, five in Masvingo, four in Gweru, three in Mutare and two apiece in Kwekwe, Kadoma and Chegutu and seven others.
“The sector has remained largely dominated by 10 microfinance institutions which controlled 83,76% of the market share in terms of total loans as at March 31 2014. The largest microfinance institution had a total loan book of $54,01 million and total assets of $52,20 million as at 31 March 2014,” the Reserve Bank of Zimbabwe (RBZ) said.
The report indicates that the trend in the number of licensed MFIs grew from 213 in 2005 to 309 in 2007.
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In 2008, the number of operating MFIs plunged to near zero as the hyperinflationary environment decimated the institutions’ balance sheets. However, the number of operating MFIs has been gradually increasing following the adoption of the multicurrency regime.
However, the report has also highlighted key challenges being faced in the MFI sector which are funding, high interest rates, corporate governance and weak risk management systems.
“The microfinance sector continues to face funding constraints largely attributable to general liquidity constraints in the economy and limited availability of wholesale funds.
“High interest rates charged by the MFIs have precipitated a high level of indebtedness among the microfinance clients which has the undesirable effect of negating the financial inclusion objective of microfinance,” RBZ said. MFis are regulated by RBZ.
