Reserve Bank of Zimbabwe (RBZ), Governor, Dr John Mangudya revealed that 31 microfinance institutions ceased operations during 2020 citing viability challenges.
Zimbabwe witnessed reduced economic activity last year due to a lockdown.
“A total of 31 microfinance institutions ceased operations during the course of 2020 citing viability challenges arising from constrained funding and low business volumes compounded by the Covid-19 pandemic,” Mangudya said.
“The ‘hightouch’ business model adopted by a number of microfinance institutions, which entails physical visits and meetings with clients, presented challenges during the Covid-19 pandemic with respect to disbursement of loans and collections of repayments.”
An organisation representing the financial organisations, the Zimbabwe Association of Microfinance Institutions (ZAMFI) in a 2020 analysis discussed the issues of further digitalisation of processes and funding going forward.
“As it is unrefuted that covid has forced a ‘new normal’, face to face interaction will remain fearsome and should be limited. The sector needs to fully digitalize,” ZAMFI says.
“The Association therefore should be called upon to engage current and new systems which are affordable by all practitioners. This should reduce costs and possible loss of human life.”
ZAMFI also says the micro-financial institutions’ sector still needs affordable funding.
Nearly two hundred financial institutions are registered with the RBZ.
Mangudya said, “The microfinance sector plays a critical role in promoting access to finance to the marginalised segments and in supporting the micro, small and medium enterprises.”