The Zimbabwe Association of Microfinance Institutions (Zamfi), in collaboration with the Zimbabwe Microfinance Fund hosted the inaugural Microfinance Summer School at Montclair Resort & Casino in Nyanga on December 4-5 under the theme “re-defining microfinance”.
Financial Sector Spotlight with Omen Muza
I was fortunate to be invited to the event, whose highlights are the subject of this week’s installment.
Deputy Reserve Bank of Zimbabwe (RBZ)governor Charity Dhliwayo, who delivered the keynote address and officially opened the summer school, spoke about how we often loosely speak of or think about financial inclusion as the mere provision of financial services, yet it’s also about affordability, accessibility and the impact of financial services.
She announced that the apex bank was seized with crafting the National Financial Inclusion Strategy, of which microfinance was identified as one of the four pillars.
Accordingly, the near-final draft of the strategy was availed to the association for further dissemination to its members. Dhliwayo duly challenged Microfinance institutions (MFIs) to align their activities with the unfolding regulatory and strategic framework, in order to play their part in enhancing financial inclusion.
Norman Mataruka, the RBZ director, who doubles as the Registrar of Microfinance Institutions, challenged MFIs to come up with more innovative products that go beyond the usual salary-based lending so that these could be acknowledged and encouraged at policy level, while highlighting the positive aspects of microfinance. Sadly, the MFIs did not rise to the occasion on the day, but the offer remains open beyond the event.
Another key issue Mataruka revealed was that the complaints that the RBZ receives on an ongoing basis from the public are an important component of the licensing matrix. He also addressed the issue of the 1-year renewable licence for MFIs, a major concern for the sector which creates uncertainty in their operations and curtails their ability to raise funding beyond 12 months.
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Mataruka said the apex bank fully acknowledged this and had urged Finance minister Patrick Chinamasa to deal with the issue. He also spoke about how RBZ was opening up to become a more facilitative regulator, rather than just being overbearing heavy “spirit that sees you, but which you can’t see,” focused on control, something he acknowledged the bank had been in the past.
Regarding financial inclusion, he said the apex bank took it seriously and had in fact literally suspended most of its programmes in order to give greater impetus to the financial inclusion agenda.
Farayi Dyirakumunda of XDS credit bureau spoke about how important it was for MFIs to use credit bureaus more, which would increase the amount of information available for sharing.
He emphasised this by giving the analogy of how more people sharing information created more networks.
His views were echoed by Alan Goodrich of the Financial Clearing Bureau (FCB), whose presentation focused on Harvard’s Entrepreneurial Finance Lab (EFL), specifically designed to address the “willingness to pay” question using psychometrics and other non-traditional data to predict risk. Goodrich said running successful credit reference bureaus was a numbers game.
One of the key highlights of the Summer School was the discourse about the appropriate business model for the microfinance sector, with some arguing that the often ridiculed salary-based model was not necessarily all about consumption.
Lovemore Mango of FMC Finance contended that some of the money ostensibly borrowed for consumptive purposes, was apparently used for productive purposes.
Virginia Sibanda of Virl Microfinance, however, argued for the cause of developmental lending, which is seen as more sustainable and positively impactful. Morris Mpala of MOB Capital advocated for a middle-of-the road posture that recognises the merits of both approaches.
In the final analysis, however, the sector is unanimous about the imperative of gravitating towards a more developmental model of microfinance.
Peter Rwema, the executive director of AMIR, the Rwandan equivalent of Zamfi, spoke on global and regional trends in financial inclusion and interestingly he also reiterated the earlier message delivered by Dhliwayo about financial inclusion being much more than just availing financial services, but also ensuring that the services are affordable, accessible and have a positive impact.
He also highlighted that unlike the situation in Zimbabwe where Savings and Credit Co-operative Society fall under the Ministry of SMEs and Cooperative Development while MFIs fall under the Reserve Bank of Zimbabwe, in Rwanda both types of institutions fall under the central bank since they are all deposit-taking institutions with a minimum capital requirement of $2 million, compared to the $5 million required for deposit-taking MFIs in Zimbabwe.
Also presented at the summer school by an independent consultant were the preliminary findings of the regulatory review, which Zamfi commissioned with the technical assistance of a development partner which focuses on private sector development.
Notable findings included the huge capital gap between credit-only MFIs and deposit- taking MFIs, the lack of alignment between the Microfinance Act and the National Microfinance Policy, the bias of the Microfinance Act in favour of consumers at the expense of MFs, the threat of NPLs to the survival of MFIs, as well as the validity period of the microfinance licence.
Other speakers included Mildred Chirwa of Hammer & Tongues Moneylenders who spoke about how to deal with operational challenges in the sector, Willard Gwarimbo of Harare Institute of Technology who spoke on professionalising microfinance courses, Kotsai Makamure of the Microfinance Industry Pension Fund who articulated the imperative of strategic human resource retention in a tough operating environment, in which job losses have become endemic and Brian Zimunhu, the managing director of the Zimbabwe Microfinance Fund who updated the delegates on the fund’s milestones to date.
In his closing remarks, Zamfi board chairperson, Patrick Mangwendeza, said by organising a summer school, at which the industry could share insights on the latest trends and chart the way forward, the microfinance sector had shown that it had come of age. He also spoke about the need for the industry to document its achievements, improve its risk management and corporate governance frameworks in order to attract investment and the necessity of gravitating towards developmental lending.
l Feedback: [email protected]. You can view Omen’s LinkedIn profile and initiate contact at zw.linkedin.com/pub/omen-n-muza/30/641/3b8
