HARARE, September 7 (The Source) – Microfinance institutions say the move by the central bank to curb interest charges on lendings has hit their operations hard, with the majority of MFIs struggling due to the high cost of money.
In March this year, the Reserve Bank of Zimbabwe (RBZ) pegged interest charges by MFIs at 10 percent per month. Prior to the directive, microfinanciers were charging between 20-30 percent interest rate per month, according to the executive director of the Zimbabwe Association of Microfinance Institutions (Zamfi), Godfrey Chitambo.
He told The Source at a microfinance conference on Thursday, that small microfinance institutions, which account for 60 percent of the industry, are not operating profitably.
“The 10 percent interest rate is a challenge especially to the small players although big players can afford it, but among the 183 registered microfinance, 60 percent are small players and they are finding it very tough ,” Chitambo said.
“Those microfinance institutions who charge more than 10 percent are sued for breaching this command, which attracts a fine of about $3,800.”
Chitambo said microfinance institutions will lobby the central bank to review the interest rate.
“On the 10th of October, we are going to bring all practitioners to hear their experiences under the 10 percent interest rate direction, before we lodge a complain to the RBZ, to ascertain whether they are affording it or if they are not closing branches or reducing their staff to meet their expenses,” he said.