Njabulo Bhebe, Business Reporter
THE introduction of a perpetual licence to the micro-finance industry is expected to attract more investors and spur the growth of the sector seen as key in an economy driven by small to medium businesses that rely on small loans.
Zimbabwe Association of Micro-finance Institutions (Zamfi) executive director Mr Godfrey Chitambo told Sunday News Business that the introduction of long-term licenses was likely to attract more players both local and foreign to invest in the country’s micro-finance sector.
“The issue around perpetual licence for micro-finance institutions has been a contentious matter for a very long time, but we are happy and excited that finally both parties have agreed to embrace it and include it in the Micro-finance Act. It’s no longer a legal requirement to renew the licence every 12 months as has been the case for the past two decades. Now investment both locally and international is free to find its way into the sector, leading to long-term commitment of funds with capacity to significantly raise the profile of micro-finance business in the country. This commitment of funds will likely see an increase in competition, efficiency, productivity and outreach of loans by the sector,” he said.
Prior to the introduction of the perpetual licence, which is contained in the recently enacted Micro-finance Act both credit and deposit micro-finance used to renew their operating licences annually. Mr Chitambo, however, said micro-finance institutions (MFIs) should guard against having their licences cancelled for failure to adhere to standing regulations.
“It (licence) is not perpetual in that it can be cancelled. MFIs therefore should take heed and note that there are always compromises in life and in business. For the sector to get the desired licence, practitioners need to operate in a manner which will not activate authorities to consider cancelling licences for some practitioners. Although it has never been heard of, as an association we do not envisage a day where reverse amendment would be mooted such as to re-consider the perpetual licence issue. We are therefore calling upon all practitioners to enjoy and celebrate this licence with responsible and ethical lending so that they do not end up with licences being revoked, institutions placed under curatorship or liquidated by the regulatory authorities,” he said.
Mr Chitambo said there was a need for Government to come up with policies tailor-made to ensure MFIs play their role of eradicating poverty among the country’s populace.
“Micro-finance requires other enabling tools to eradicate poverty such as good macro-economic policies, attractive investment environment and productive economic growth,” he said.
Mr Chitambo further stated the need for a Financial Consumer Act premised in the same way as the Consumer Protection Act.
“It’s time to have a Financial Consumer Protection Act that caters for all financial dealings in commercial banks, micro-finance institutions, insurance, asset management companies and investment companies where a lot of unfair bad practices are currently the norm, leaving consumers largely unprotected. Be that as it may, Zamfi is aware, is part of and fully supports financial literacy and consumer protection initiatives being executed by the Central Bank under certain taskforces. With time positive fruits are going to be borne by such initiatives,” he said.
Source: https://www.sundaynews.co.zw/perpetual-licence-to-spur-micro-finance-sector-growth/
