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MICROfinance institutions (MFIs) in Zimbabwe are charging higher annual interest rates in comparison to other developing countries in the region hence failure to carry out their main mandate of poverty alleviation.

MICROfinance institutions (MFIs) in Zimbabwe are charging higher annual interest rates in comparison to other developing countries in the region hence failure to carry out their main mandate of poverty alleviation.

Mbongeni Ncube Own Correspondent

Speaking at a Microfinance Public Forum held by the Zimbabwe Association of Microfinance Institutions at a local hotel under the theme “Creating Sustainable Microfinance”, National University of Science and Technology Lecturer in the Banking Department, Tendekayi Mutambanadzo said microfinance institutions in the country were charging exorbitant annual interest rates.

“In Zimbabwe MFIs are charging astronomical interest rates with borrowing rates of 30% to 40% per month (360 % to 480% per annum), in comparison to other countries in the region such as Zambia charging 39% to 60% per annum and South Africa at 30% to 60% per annum,” Mutambanadzo said.

“MFIs should act responsibly in their business conduct so as to fulfil their poverty alleviation mandate noting that they strive in developing countries characterised with high unemployment.”

Mutambanadzo said the public should note that microfinancing is a business “not a hand out or charitable business entity like NGOs”.

He attributed the high interest rates charged by MFIs in Zimbabwe to high operational expenses, administrative expenses and costs of funds.

“We urge MFIs to adopt new technology and hire efficient employees so as to reduce their operational costs. In Bulawayo the average rental rates range is at $2 500 per month for a small sized offices, combined with high salaries with minimum entry level graduates at about $400 per month,” he said.

Mutambanadzo urged MFIs to tap into capital markets for funding and foreign sources in the form of donor funding rather than sourcing funding from mainstream banks at “unforgiving” interest rates.