Zimpapers Logo

Dr Mangudya

Martin Kadzere : Senior Business Reporter

THE Reserve Bank of Zimbabwe is considering three applications from companies intending to establish deposit taking micro finance institutions, governor Dr John Mangudya said. The recent structural shift that has happened in Zimbabwe’s economy where the informal sector now accounts for a significant part of the economy has seen a rapid growth of the micro finance industry, which is key in bridging the finance gap of providing loans to the micro, small to medium businesses and the informal sector.

Zimbabwe has 115 micro finance institutions, with three registered to take deposits.

The current growth of SMEs, informal businesses, small scale agricultural activities and related downstream industries have created a viable growth market for micro lending.

“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 on Monday.

Zimbabwe’s small businesses and the informal sector employs a significant percentage of the working population, but have been unable to access credit from large banks.

And with most MFIs lending to urban based or SSB employees, there is a lack of microcredit and deposit taking in the rural areas where the bulk of the population lives.

Dr Mangudya said Cabinet had approved the establishment of the Collateral Registry System that would enable the use of movable properties as security for financial credit.

Already, Zimbabwe is working on Movable Property Security Interests Bill that will facilitate increased access of credit to micro, small and medium enterprises as well as communal farmers.

The objective of the proposed law is to facilitate commerce, industry and other socio-economic activities by enabling individuals and businesses to utilize their movable property as collateral for credit, to establish the collateral registry and to publicize the potential existence of interests in the collateral. The creation of collateral registry system will avoid borrowers using collateral already registered with other institutions.

Dr Mangudya said the Reserve Bank Act will be amended to give legality to the collateral registry.

He however expressed concern over high interest rates being charged by MFIs, but noted that inadequate working capital was pushing the interest rates high. Economic analysts say private sector players need to move beyond the traditional micro finance model. They should also source funding from donor and Development Finance Institutions and private equity players.