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Bianca Mlilo, Business Reporter
THE Reserve Bank of Zimbabwe has set a $5 million minimum capital threshold cap for deposit taking microfinance institutions (DTMFIs) as part of measures to increase financial inclusion and protect the banking public.

Early this year the central bank offered deposit taking licences to Getbucks Financial Services and African Century Limited while several MFIs are still on the micro-credit level.

The setting up of a minimum capital threshold opens up more avenues for growth for the growing micro-finance sub-sector.

Previously the RBZ had set minimum capital requirements for MFIs at $25,000.

In a draft consultative document issued this month the RBZ’s supervision division outlined a list of requirements for deposit taking MFIs.

The list includes but is not limited to the requirement to maintain a minimum liquidity ratio of 30 percent of specified liquid assets.

“Every applicant DTMFI shall have and maintain on an ongoing basis, a minimum paid-up share capital of $5 million or as may be prescribed,” said the RBZ.

“Paid-up share capital shall consist of the following components: issued ordinary share capital; share premium; irredeemable preference shares; retained profits reflected on audited financial statements; and current year unaudited but verifiable retained earnings.”

The central bank said all registered DTMFIs would be required to maintain an intact minimum paid-up share capital and reserves, as laid out by the Microfinance Act at all times while in operation and holding the licence.

It said every DTMFI would be required to maintain unimpaired capital, which is above the minimum capital requirement, despite meeting the minimum capital adequacy ratios.

“Every registered DTMFI shall maintain a core capital ratio of not less than 10 percent of the Risk Weighted Assets (RWA) and total capital adequacy ratio of not less than 15 percent of the RWA or as may be prescribed by the Reserve Bank from time to time,” reads the document.

“The Reserve Bank shall determine whether an institution is in compliance with the capital adequacy requirements as may be prescribed from time to time.

“Where the Reserve Bank determines that a DTMFI is not complying with the minimum capital requirements and ratios, it may impose any of the corrective actions prescribed in terms of section 37 of the Microfinance Act and any or all of the following measures.”

In cases where DTMFIs fail to comply with minimum capital requirements and ratios, the RBZ could impose restrictions, which include but are not limited to the prohibition of the declaration or payment of dividends or the establishment of new branches.

The central bank can also prohibit the introduction of new products and activities or acceptance of further deposits. It can also prohibit declaration and payment of bonuses, salary incentives, severance packages, management fees or other discretionary compensation to directors or officers.
Zimbabwe has 163 MFIs as at March 31, 2016, an increase from 156 at the end of last year. Micro-finance institutions have filled a gap in provision of financial services, which conventional banks, facing liquidity constraints that tend to favour operating in cities and towns, have failed to service.