The microfinance sector is optimistic of increased donor support this year, riding on the back of thawing relations between government and the western world but is worried about the ability of struggling civil servants, who form the sector’s core client base, to repay their loans, an official has said.
Western donors, who previously provided the much needed funding for microfinance institutions (MFIs) pulled out at the height of deteriorating political relations between Zimbabwe and the west over a decade ago, leaving the sector on the brink of collapse.
Donors have since marked their return to the sector through establishment of the Zimbabwe Microfinance Wholesale Facility in 2012 (ZMWF) which has so far disbursed over $6 million to MFIs for on lending.
The donor funding however remains a drop in the ocean compared to the demand forcing MFIs to scrounge around for survival in a highly illiquid economy.
But Zimbabwe Association of Microfinance Institutions(Zamfi) chairman Patrick Mangwendeza said that restoration of relations with the west would be a boon for the sector.
“Donor support in the form of increased funding into the microfinance sector is likely to go up after our restoration of normal international relations with many countries in the European region,” he said.
“The positive discussion and compromises being made on clarification of the indigenisation law will assist in a big way in just making foreign direct investment a possibility as Zimbabwe is lagging way behind some of its neighbours.”
Already the DFID, United Kingdom, Hivos, Danida from Denmark and Germany’s GIZ are key donors for the ZMWF.
Mangwendeza said the liquidity crunch gripping the economy was posing a threat to the sector, which provides credit for low income households and small to medium scale enterprises.
He was, however, optimistic that strategies being pursued by government under its economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, would help drive the economy’s performance for the benefit of the sector.
Government’s failure to pay civil servants – who make up the majority of MFI customers – their salaries on time due to budgetary constraints was a matter of concern, he added.
“Civil servants who form the bulk of the clients supported by our members, have of late been experiencing erratic delays in receiving their salaries from government,” the Zamfi chairman said.
“This obviously has translated into delays in MFIs being paid their outstanding loans by civil servants, thereby leading to a sudden increase in non-performing loans.”
According to the Reserve Bank of Zimbabwe, the MFI sector disbursed $177.7 million in the first half of last year, an 82 percent increase compared to the previous year.-The Source