Reserve Bank of Zimbabwe (RBZ) governor, Gideon Gono, has sternly warned Microfinance Institutions (MFIs) against unscrupulous practices, stressing the central bank would not hesitate to revoke their licences in the event they are found on the wrong side of the law.
The warning comes barely a month after the central bank unearthed irregularities in the operations of the small scale money lenders, including subversion of legal processes in debt collection and acting as deposit-taking banks and insurance companies.
The RBZ's registrar of banking institutions, Norman Mataruka, said in December that onsite examination of MFIs carried out in September last year had revealed rot in the sector "which called for immediate action".
Mataruka said out of the 170 registered MFIs then, 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.
"Some MFIs were taking deposits in violation of section five of the Banking Act; they have been mobilizing 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.
Now, presenting his Monetary Policy Statement last week, Gono said: "Microfinance institutions are once again reminded that the Reserve Bank will not hesitate to cancel operating licences and to blacklist directors of institutions that fail to comply with laws and regulations governing the conduct of their businesses including directions and instructions issued by the Reserve Bank."
He said registered MFIs had no mandate to take deposits, contrary to what others had already been doing.
"As such, institutions and members of the public are advised to desist from dealing with unscrupulous microfinance institutions as they risk losing their hard-earned savings to corrupt and greedy individuals," said Gono.
He added: "Going forward, all microfinance institutions are required to justify interest rates and all other charges levied on borrowed funds as well as adequately disclose their business conditions."
Meanwhile, the RBZ boss has advised members of the public to be wary of fake notes in circulation.
"Under the multiple currency system the proliferation of counterfeit notes has gathered pace in a worrisome manner," remarked Gono.
"Mostly the notes in United States dollars and South African rands are circulating in Harare, Bulawayo and other parts of the country. In this regard we urge the transacting public and retailers alike to be on the constant look out for fake notes," he added.
Gono said there was need for the general public to familiarise themselves with the security features of all currencies currently used in Zimbabwe, while also urging corporate and retailers to adopt the requisite technology that assist in note detection.
"As monetary authorities, we sternly warn those who are in this illegal business of printing fake notes that the long arm of the law will definitely catch up with them. The circulation of fake notes affects business transactions as the acceptability of higher denominations becomes compromised," added the RBZ governor.