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Douglas Ncube
THE Government must increase the tenure of licences for microfinance businesses in order to enhance the sector’s contribution to national economic growth, experts have said.

While outlining their 2018 budget expectations, microfinance experts said a one-year licence tenure made their market unattractive to foreign investors.

They suggested that the Government should increase the one-year tenure to at least three years.

“The most critical aspect in the microfinance sector is to do with the licence to operate a microfinance business,” said Mr George Nhepera, a regional microfinance coordinator with the Zimbabwe Association of Microfinance Institutions. “We are given a one year licence as opposed to our banking counterparts, who are given a perpetual licence, that’s a licence for life.”

He added: “The one year tenure has been a cumbersome aspect in the microfinance sector, as it makes it difficult for the sector to attract investors. When one wants to make an investment in a microfinance business as a shareholder, the first question they ask you is, ‘what’s the licence tenure or period?’ If it’s one year, it means we are unable to attract investors in our market, especially the foreigners.”

Mr Nhepera said the Ministry of Finance and Economic Development has to swiftly review this and present proposed changes to Parliament.

In August 2013, the Government promulgated the Microfinance Act, to regulate the sector, and promptly, in the same year, began a process to amend the law to deal with several weaknesses. However, recommendations from the sector have yet to be incorporated into the Act.

“One thing I’ve realised in our country is that the legislature takes time to address these things,” said Nhepera. “These things keep adding up because now we have more expectations.”

He said that the Government should use the 2018 budget to reduce the cost of funds, which ranged from 12 to 18 percent per annum.

“If this is the same US dollar in America, why are we then supposed to pay 12 percent to access the same currency, whereas in America you can access it at only one percent?” asked Mr Nhepera. “This is too high compared to other markets.”

Micro-financiers said they also hoped Treasury would deal with the cost of doing business, lack of skilled labour, the high cost of acquiring new technologies and the over-indebtedness of their clients. “The cost of doing business is too high in the sense that one has to pay rentals, utilities like ZESA, telephone bills and so forth,” explained Mr Nhepera.

“We also face the lack of skilled labour. Most people who come to be officers are not oriented in the microfinance sector for example, students come from the National University of Science and Technology, Midlands State University and Lupane State University, where they’re not taught microfinance at any given platform. This has to be looked at.”

He said that the sector was still operating manually due to the high cost of acquiring new technologies.

“Ideally, a microfinance institution has to have a proper accounting system put in place to capture accounting and loan management data. However, some members in the sector are still using sale sheets to do data capturing,” said Mr Nhepera.

Another member of the microfinance sector, Mr Morris Mpala, the managing director of MoB Capital Private Limited, said that the sector wanted the Government to establish express commercial courts, which would deal with commercial disputes between clients and financial institutions.

“We need commercial courts so that all the commercial arbitrations or resolutions are done in a short period of time,” said Mr Mpala.

“The available courts are slow and very expensive.  In the long run, we end up using more money compared to what the client owes us. There is a need for quicker and affordable courts so that commercial disputes are resolved fast.”

Douglas Ncube is a fourth year journalism student at the National University of Science and Technology