Harare, February 14, 2015 (New Ziana) – Zimbabwe’s first ever microfinance bank (MFB) will soon open its doors to the public after it was licensed to operate by the Reserve Bank mid-last month, an official has said.
The microfinance bank, named African Century Limited, will be a deposit taking microfinance institution and makes history by becoming the first such legal entity operating in the economy.
Reserve Bank of Zimbabwe governor Dr John Mangudya said the central bank had licensed ACL on January 15 after it had met the minimum requirements.
“The institution will commence deposit-taking microfinance business upon the successful completion of a pre-opening inspection,” he said.
“The coming on board of deposit-taking microfinance institutions is envisaged to enhance access to financial services particularly by the lower income groups of our society, thereby promoting a savings culture in the economy.”
The central bank said nearly two years ago it would permit MFBs, required to have a minimum capital threshold of $5 million, to operate but there had been no takers despite earlier market cries for such institutions to be allowed to operate.
Struggling commercial banks, some of which have since ceased operations, had been largely expected to downgrade their operations into MFBs while some microfinance institutions (MFIs) were anticipated to upgrade their license but this did not happen.
“While the current minimum capital of $5 million may be too high for our members to consider upgrading, there is likely to be new players coming into the sector and open microfinance banks or existing banks struggling to meet the new capital requirements downscaling to micro banks,” said Zimbabwe Association of Microfinance Institutions chairman, Patrick Mangwendeza.
Zimbabwe has 147 registered microfinance institutions registered with the central bank and hundreds more operating in the shadows.
Experts in the MFIs sector say some of the institutions have not upgraded into microfinance banks to avoid central bank scrutiny.
Unlike commercial banks, which have been criticised for milking depositors, MFBs are expected to serve low income groups, providing not only basic banking services at reasonable rates but also extending loans at affordable rates compared to those offered by ordinary microfinance institutions.
Referred to in some countries as “banking for the poor” MFBs are popular and are flourishing in countries such as Nigeria where over 700 are in operation.
MFBs are known for being the major players in supporting the informal sector as well as small to medium enterprises, which in the case of Zimbabwe have become the economy’s spinal cord.