Bianca Mlilo, Business Reporter
THE Zimbabwe Microfinance Fund (ZMF) says mergers and consolidation of existing microfinance institutions (MFIs) could be the panacea to building bigger and better capitalised finance institutions and bringing order to the sector.

ZMF managing director Mr Brian Zimunhu yesterday said the operating environment had not been favourable to most enterprises this year.
He, however, hailed the use of mobile money saying the option had eased some of the challenges.

“The market has more than 160 licensed MFIs but when you look at the combined outreach and portfolio size, the sector is about the size of two or three big MFIs from Kenya,” said Mr Zimunhu.

“From that perspective, one can see that we have numerous tiny MFIs struggling to make an impact and unable to withstand competition should bigger MFIs emerge.

“At this time we probably need to see more mergers and consolidation so that we end up with bigger and well capitalised MFIs that are able to efficiently offer a wide range of well researched, client focused products. For our small national market, 160 MFIs is probably too high.

“New entrants should only meet a certain level of capitalisation that should enable them to generate impact.”

Mr Zimunhu said the capping of interest rates for MFIs could lead to the reversal of the intentions of the financial inclusion strategy, adding that various factors contributed to the setting of interest rates.

Some MFIs, he said, are likely to close shop and re-open as informal lenders, which charge much higher rates than regulated MFIs and those that survive might end up closing remote branches to focus on urban  ones.

He said any capping of interest rates should take into cognisance factors, which include cost of money, level of loan losses, administrative expenses and desired profit level among other things.

Mr Zimunhu said 2016 had not been that bad for the sector with ZMF having collected upwards of 90 percent of all repayments due.

The cash crunch being faced by the country had also affected the MFI sector and the unavailability of cash had delayed some payments due to the excessive use of cash for transactions at the bottom end of the economic matrix.

“This has seen some ZMF clients delaying some payments, but still clear them within reasonable times,” said Mr Zimunhu.

@BiancaMlilo

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