Capacity utlisation at most microfinance institutions (MFIs) in the country have remained low despite the huge appetite for credit as a result of lack of financial muscle to parcel out to needy consumers, it has been learnt.
Zimbabwe Microfinance Institution (Zamfi) chairman Godfrey Jokonya said there had been a significant reduction in the number of MFI’s that have remained operating viable since the adoption of multi-currency system in 2009.
“We are seriously underfunded and we are looking for money from banks and other financial institutions that can avail funds to us. It has however been difficult to access funding as a the result of economy-wide shortage of capital,” said Jokonya.
According to a report by the Reserve bank of Zimbabwe, as of December 2010 the country had 114 microfinance institutions indicating a huge decline from at least 1 700 that were operational in the country in 2003.
Jokonya said the liquidity crisis has resulted in funds beings more expensive than they would if the market was liquid.
“In Zimbabwe as microfinance institutions we have never managed to get more than 10 000 customers on our loan books. This shows that we have small microfinance institutions in the country as compared to other countries in the region that have more than 20 000 customers on a loan book of any one institution,” Jokonya said.
Jokonya said there was need to strengthen the existing MFIs through various mechanisms adding that the sector was operating at between 20% and 40%.
He said most MFIs were facing challenges such as high administrative costs and other overheads.
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According to a report done by Daniel Makina, an associate professor at the University of South Africa in 2009, the sub-optimal performance of microfinance institutions and development finance institutions in the country was due to incompetent management, weak internal controls and poor corporate governance.
The microfinance institutions provide funds for small and medium enterprises in the country as they sometimes fail to meet the requirements set by financial institutions for them to access funding for their operations.
The government is currently working on the microfinance Bill to help the operations of MFIs in the country.
