|Gono blasts moneylenders, micro-finance firms|
|Friday, 15 June 2012 12:00|
RESERVE Bank of Zimbabwe Governor Dr Gideon Gono has fired a salvo at money lending and micro- finance institutions for “objectionable and unscrupulous” business practices. According to the RBZ Governor, continued misconduct by these institutions will result in them losing their operating licences.
This comes as a number of money lending and micro-finance institutions have been associated with practices such as inadequate disclosure of business conditions, exorbitant lending rates of up to 50 percent a month, abusive debt collection practices and the disposal of pledged collateral without following due legal processes.
In a circular distributed to these institutions, Dr Gono said it was clear that they were not complying with best practices as enunciated in earlier monetary policy statements.
“The numerous complaints we have received to date evidently demonstrate that such policy advice has gone unheeded and deliberately ignored.
“Micro-finance institutions are sternly warned that failure to comply with laws and regulations governing the conduct of their businesses including directives and instructions issued by the Reserve Bank will lead to the imposition of appropriate supervisory action, including cancellation of operating licences,” said Dr Gono.
Some of the unethical practices of the money lending and micro-finance institutions are contributing to greater public unease in respect of the local financial services sector.
The sector is already reeling from the shock waves of of the placement of Interfin Bank under curatorship this week and the voluntary surrender of Genesis Bank’s banking licence following its failure to raise the requisite minimum capital.
Dr Gono said some of the practices by money lending and micro-finance institutions were adding to vulnerabilities in the financial sector.
“In addition, there are allegations that some micro- finance and money lending institutions are illegally taking deposits from members of the public ‘spicing’ their illegal activity by quoting ‘tempting’ deposit rates posing a threat to financial stability,” he said.
To the extent of the moneylenders and micro-finance institutions continually defying the internationally agreed Core Client Protection Principles for micro-finance in conducting their business, Dr Gono has directed these institutions to observe the minimum requirements for all loan agreements or face cancellation of their licences.
The RBZ has since requested all moneylenders and micro-finance institutions to submit justification for their respective interest rate charges as well as any other charges applicable for loans offered by the institution.
Financial experts believe that there is need for the RBZ to strengthen its regulatory and surveillance mechanisms in order to minimise the effects of systemic risks that affect the financial services sector.
These risks typically stem from poor corporate governance.