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Oliver Kazunga, Senior Business Reporter
THE Zimbabwe Association of Microfinance Institutions (Zamfi) has agreed to cap lending rates to a maximum of 10 percent per month with effect from October 1, 2016 in line with a Reserve Bank directive.

In his Mid-Term Monetary Policy Statement last week, Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya said microfinance institutions should lower their interest rates so as to fulfil their strategic role in the National Financial Inclusion Strategy.

He said this was also meant to foster sustainable economic development.

In a written response to questions from Business Chronicle, Zamfi executive director Mr Godfrey Chitambo yesterday said:

“As an association, we’ve a very strong policy on engagement. The RBZ has been liaising with us for the past three months or so on this (lending rates reduction) aspect and we submitted our recommendations.

“We believe there is need to maintain a balance between ensuring that clients get service at an affordable cost and on the other hand ensures the continued operations of MFIs on a sustainable basis. That is the basis of our engagement with the Central Bank.”

Mr Chitambo said for a long time since 2010, the interest rates have been between five percent and 20 percent per month for many MFIs.
“Of late some have moved to as low as 2.5 percent per month,” he said.

Dr Mangudya highlighted that the RBZ is also considering extending licences from the current one year, a development, which Mr Chitambo said would bring relief to MFIs who have in the past been treated differently from their banking counterparts who have perpetual licences.

“The current one year licence renewal is indeed highly prohibitive to MFIs with a long-term programme of advancing credit to the marginalised communities.

“Once the one year licence is done away with, the sector shall definitely begin to see MFIs supporting more income generating projects that require funding for longer periods.

“In addition, the sector will attract funding from international investors who normally prefer to work with MFIs on a longer term basis,” he said.

As at August 31, 2016 the microfinance sector was made up of four deposit taking MFIs and 164 credit-only institutions.

According to RBZ, total loans for the sector as at June 30, 2016 was $183.4 million with the level of Non-Performing Loans (NPLs) presently at 9.88 percent, a declining trend from 13.31 percent recorded last year in June.

The MFI sector targets to eradicate poverty and promoting economic development among low-income households and small and medium enterprises.

@okazunga.