7 December 2012

Zimbabwe: RBZ Unearths Irregularities

The Reserve Bank of Zimbabwe (RBZ), has unearthed irregularities in the operations of microfinance institutions (MFIs), including subversion of legal processes in debt collection and acting as deposit-taking banks and insurance companies.

Addressing micro financiers at a workshop in Bulawayo last week, RBZ's registrar of banking institutions, Norman Mataruka, said an onsite examination of MFIs carried out in September had revealed rot in the sector which called for immediate action. Mataruka said out of the 170 registered MFIs, only 133 were operating. Of the 37 not operating, 17 had not yet commenced, 13 had ceased operations but had not notified the RBZ, five had their licences expired while two were still setting up.

He said some of the reasons given for failure to operate were lack of funding.

"Some MFIs were taking deposits in violation of section five of the Banking Act; they have been mobilising deposits under the guise of issuing debentures and preference shares," said Mataruka.

"Some MFIs were charging insurance fees; they are not even insuring what they are actually charging. That's a way of siphoning people's money," he added.

Mataruka said it was also disappointing that much of the MFI loans were skewed towards consumptive lending, a situation he said was not good for the growth of the economy.

Central bank chief legal counsellor, Susan Kabungaidze, said they had received a number of complaints involving MFI's agents confiscating property from defaulters during times of bereavement when the clients would be helpless.

She said in some instances, MFIs confiscated clients' ATM cards in order to withdraw money from their accounts to clear debts, in violation of the legal processes.

"Please find other ways of getting the money than taking people's ATM cards," she warned.

The central bank's investigations established that most MFIs were family-owned and did not have proper records. Senior management at some instances were not qualified.

Zimbabwe Association of Microfinance Institutions (ZAMFI) executive director, Godfrey Chitambo, said they were doing their best to correct their public image.

"We think we must now show the public that we are serious," he said.

Chitambo said owing to liquidity challenges bedeviling the economy, with the majority of civil servants who constitute the bulk of their clients earning an average of between US$300 and US$500 per month, their biggest loans range between US$700 and US$1 000.

On loans repayments, Chitambo said: "Payments are not as good as we would have loved them to be but this is how the situation is. We can't just lie down and say we are going to die tomorrow. We have to operate in that environment."

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