According to a report in the Herald, the Reserve bank of Zimbabwe opened 19 microfinance institutions during the first half of 2018. Though the Empowerbank launch was publicised by the government more overtly, the RBZ has registered 18 such institutions and some of the other institutions include Mula Microfinance and Raysun Capital.
Overall, there are now around 194 microfinance institutions in the country which seems like an excessive number. I couldn’t find the number MFIs in SA, Kenya and India so I will quit grumbling without any other reference points.
Anyway, the rising popularity of these MFIs makes sense considering that Zimbabwe is producing over 20 000 graduates into something that kind of resembles a job market. This means everyone SMEs are the order of the day and at the end of the day there is a huge opportunity for the MFIs and tap into this market. MFIs are taking their cut whilst giving SMEs an opportunity to take off, and that on the surface of things that’s a win-win.
Why are these institutions important?
If the microfinance institutions which were opened carry out their mandate efficiently, they could lessen the burdens faced by many SMEs or even groups/individuals looking to start businesses as MFIs;
- Provide access that banks do not. Banks do not give loans to those with little or no assets at all. For those looking for capital to start a business but have no assets can be bailed out by MFIs as banks will only laugh in their faces before reminding them how dire their financial situation is…
- Are more inclusive and tend to target women. Women are said to be better at repaying their loans, which makes them a safe investment for the people giving out the loans. In Zim, we’ve also seen some MFIs calling on the youth.
It’s not all rosy for FMIs
Though the services offered by MFIs seem to be in high demand, it’s not all sunshine as 17 of the 194 institutions reported losses due to the ‘depressed’ economic environment.