MFI loans going  towards consumption Dr Charity Dhliwayo
Dr Charity Dhliwayo

Dr Charity Dhliwayo

Business Reporter

Zimbabwe’s micro finance institutions extended loans totalling $187 million in 2015, with the bulk of the funds going towards consumption. According to figures from the Reserve Bank of Zimbabwe, about 46 percent of the loans went towards productive sectors while 54 percent was for consumption. Central bank deputy governor Dr Charity Dhliwayo last week said as at February 26, 2016, banking sector loans to small to medium enterprises were $154,26 million representing about 4 percent of total banking sector loans down from $202,37 million.

“The declining trend is indicative of banks’ low appetite to lend to the sector due to increasing perceived credit risk in view of the adverse operating environment,” said Dr Dhliwayo.

The RBZ statistics show that the MFI loans distribution trends in the country between 2013 and 2015 have been invariably dominated by consumptive lending. 2013 figures show that MFIs extended loans totalling $164,2 million, of which 70,8 percent ($116 million) went to consumption, while the balance ($47,8 million or 29,1 percent) went towards the productive sectors.

There was an improvement in 2014 in respect of the ratio, but the key trend was unchanged as MFIs loaned out a total of $156,9 million.

The country now has four deposit-taking MFIs,which have expanded the range of services available to low income earners and small businesses while governor Dr John Mangudya recently said there were three applications which were under consideration.

“There are three companies that are in the pipeline; we are processing their applications to become deposit taking micro-finance institutions. By the end of the year, we will have five institutions,” said Dr Mangudya while addressing a Parliamentary Portfolio Committee on Finance and Economic Development.

Following the promulgation of the MicroFinance Act (Chapter 24:29) in 2013, the registration of deposit-taking microfinance institutions has broadened the product range for the target clientele of low income segments of the population.

“To date four micro-finance banks have been registered. Dr Dhliwayo added that SMEs deposits would be treated as any other in case of a bank failure. The RBZ intervenes in the resolution (including exit) of troubled banking institutions to minimise loss to depositors. Where a bank is closed, SMEs are treated in the same manner as other creditors or depositors,” said Dr Dhliwayo.

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