Published: 07 August 2017

THE Reserve Bank of Zimbabwe (RBZ) says it will take action against microfinance institutions that continue to charge lending rates above 10 percent per month.

In February, the monetary authority issued a circular to all microfinance institutions directing them to peg their lending rates at 10 percent inclusive of administrative costs.

In the mid-term monetary policy statement, RBZ Governor Dr John Mangudya said:

"Cognisant of the catalytic role that microfinance institutions play in poverty reduction and financial inclusion, the Reserve Bank issued Circular Number 02/2017 to all microfinance institutions requiring them to align their lending rates to ensure that the effective lending rate, inclusive of all administrative costs, does not exceed 10 percent per month".

He, however, said the Reserve Bank noted with concern that a few microfinance institutions were still charging above the stipulated lending rates.

"The Reserve Bank takes great exception to non-compliance and appropriate supervisory action will be instituted," said Dr Mangudya.

In defiance of the directive by the monetary authority, some microfinance were charging interest rates ranging between 19 percent and 25 percent per month.

The Central Bank boss urged microfinance institutions to continue being innovative and provide a wider array of micro-financial services to the low income and marginalised groups in line with the National Financial Inclusion Strategy and evolving consumer tastes.

Dr Mangudya also called on the microfinance sector to continue priming up its risk management and corporate governance to build sustainable microfinance institutions, which are supportive of inclusive economic growth.

The Reserve Bank has established a $10 million Microfinance Revolving Fund that would be administered by the Zimbabwe Microfinance                        Fund.

"The ability of microfinance institutions to provide tailored client-specific financial services, and traverse the multi-dimensional complexities of the poverty phenomenon, makes microfinance a powerful multi-faceted approach to sustainable development.

"As part of efforts to support the microfinance sector and facilitate lower lending rates by microfinance institutions, the Reserve Bank has established a $10 million Microfinance Revolving Fund," said Dr Mangudya.
- the herald

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