THE Reserve Bank of Zimbabwe (RBZ) says despite improvement of micro-finance institution (MFI) compliance levels with regulatory requirements, they still need to sanitise operations.
Speaking at a Zimbabwe Association of Microfinance Institutions (Zamfi) meeting in Bulawayo on Tuesday, RBZ representative Norah Mukura said although there were improved compliance levels in the sector, some MFI operations failed to comply with the Microfinance Act, code of conduct and core client protection principles.
“This is evidenced by continued receipt by the RBZ of complaints from MFIs customers, non-submission of quarterly returns and failure to comply with licensing special conditions within stipulated time frames,” Mukura said.
She noted that such complaints as weak credit assessments leading to client over-indebtedness, inadequate explanation of terms and conditions of loans and over-deductions, leading to excess loan repayments, were the common complaints received by the central bank.
“If you are explaining terms to a client, make sure they have understood and don’t just sign. If they cannot understand English, switch to Ndebele or the language they comprehend,” she said.
The regulation expert bemoaned the growing number of MFIs engaging in illegal deposit taking through promissory notes, loan notes and debentures.
A promissory note is a financial instrument in which a person or entity promises in writing to pay a determinate sum of money to the other at either a fixed or determinable future time.
Mukura said there were disguised deposits by some institutions which were, however, punishable at law.
Most MFIs are not licensed to accept deposits as they do not hold the required capital to assure deposit protection.
Other compliance issues highlighted during the presentation were standard record keeping and information integrity which were said to be important for performance measurement and fraud detection.
Speaking after the RBZ presentation, Zamfi chief executive officer Godfrey Chitambo implored the association’s members to strive for compliance.
The Zamfi boss urged members to take advantage of the association which has various experts that are able to assist with meeting the required regulation standards.
“For example, in Bulawayo you have George (Nhepera) a former regulator with the RBZ, so consult him if you face problems,” he said.