GOVERNMENT is concerned with the punitive interest rates charged by microfinance institutions at a time the tide of inflation has been tamed, Acting Secretary for Small and Medium Enterprises and Co-operative Development Mrs Ethel Hlabangana has said.
She was speaking at the official launch of the Zimbabwe Microfinance Wholesale Facility (ZMWF) in Harare yesterday.
"The birth of institutions like the ZMWF is expected to help bring sanity in the interest rate regime on the market," she said.
She expressed hope that ZMWF would address capitalisation of microfinancial institutions that would in turn offer low interest rates to the ultimate borrowers.
She said Government had been a lone voice in the field of microfinance as can be witnessed by the launch of Sedco during the 1980s.
"Government was early in recognising the crucial significance of microfinance as a weapon to fight poverty hence its dedication to financing SMEs through Sedco," Mrs Hlabangana said.
She also noted that the provision of wholesale funds to microfinance institutions through the ZMWF would go a long way in curtailing the financial gap that had bedevilled the micro, small and medium enterprises who operation the informal sector.
"The ultimate beneficiaries of this fund are the market women, cross-border traders, farmers and small-scale manufacturers who face challenges in getting loans from commercial banks yet they contribute significantly to employment creation and economic growth," Mrs Hlabangana said.
Speaking at the same event, Registrar of Microfinance Institutions Mr Norman Mataruka said microfinance is key to the development of the economy and achievement of the Millennium Development Goals through its important role in the provision of financial services particularly to the disadvantaged sections of the population.
He said SMEs are now recognised as important economic drivers in Africa and other developing countries.
"It is therefore critical that the microfinance industry is properly positioned to serve the SME sector in the best interest of our economy," Mr Mataruka said.
He bemoaned the issue of some MFIs who were taking deposits in violation of the Banking Act that prohibits any other person besides banking institutions from taking deposits.
"In other instances, MFIs were charging unsustainably high interest rates of as much as 40 percent per month or 480 percent per annum, contrary to the objective of microfinance of uplifting the standards of living for the poor," he said.
He noted that the Reserve Bank of Zimbabwe had instituted appropriate supervisory actions including cancellation of licences, non-renewal of licences in response to the identified irregularities and deficiencies.
Mr Mataruka reiterated the need for MFIs to increase focus on developmental financing which has a positive impact on production in mining, agriculture and manufacturing.
"From our ongoing interaction with the wholesale fund, we have been advised that the uptake has been slow owing to difficulty that most MFIs are facing in satisfying the minimum requirements for accessing the fund loans." He said.
To date loans amounting to US$735 000 to only eight MFIs have been approved.