Local News

MFIs to capture unbanked market

ANALYSIS: MFIs TO CAPTURE UNBANKED MARKET

By Clarkson Mambo

Harare July 29, 2012 (New Ziana) –For decades micro-finance institutions have played a pivotal role in funding small businesses and individuals, albeit at a premium.
Traditional banks in Zimbabwe have largely failed to play this role due to their rigidity, which has also led to an estimated $3 billion to be circulating in the informal market with dire consequences on the economy, reeling from a liquidity crunch.
MFIs could once again salvage the situation given the government's latest move to license the institutions allowing them to take deposits from the public.
Finance Minister Tendai Biti announced while presenting the mid-term fiscal policy review statement a week ago that Cabinet had approved a new law “which for the first time creates an institution of a deposit taking micro finance institution.”
Previously, the MFIs had been restricted to channeling small loans mostly to small and medium scale enterprises as well as individuals.
Though some have earned the sector the title 'loan sharks' due to their exorbitant interest rates, the public has not had a choice but to rely on the institutions to access emergency funding.
Some MFIs had before the government's decision, already taken the initiative to start taking deposits from the public, albeit illegally,  and not surprisingly were getting massive support from the public due to the high interest rates which they were offering on deposits.
Banks on the other hand, have not been awarding anything on deposits while charging exorbitant rates for maintaining accounts in what Biti has described as “voodoo banking.”
The Government has since announced its intention to force the banks to award interest on deposits as well as put a cap on interests on loans.
It is this stiffness which has resulted in the public opting to stay away from banks and keeping their money under pillows and mattresses.
A recent survey by the central bank showed that only around 24 percent of Zimbabwe's adult population was banked.
Most critically, the survey revealed that 40 percent of the adult population was not banked and that Zimbabweans used informal mechanisms for savings, insurance, and borrowing.
As analysts point out, the strict rules used by banks for one to open an account, while reasonable as part of the “know your client” rule, have turned many away from the financial institutions.
And this is exactly where MFIs have an advantage over traditional banks as they are located right in the heart of where people live.
Operators in the sector believe the MFIs have psychological and emotional advantages over banks when it comes to their relationship with the public.
MFIs are not only more in terms of numbers but they are also spread out across the country, allowing easier access to the majority of the population who do not live in cities and towns.
While latest statistics from the RBZ shows that there are 163 licensed MFIs, players in the sector believe that there are many more operating underground and who will soon be regularizing their status, making them the best instrument to absorb the money circulating in the informal.
Zimbabwe Association of Microfinance Institutions (Zamfi) executive director, Godfrey Chitambo contends that the move by government would open doors for more investment in the sector.
“This will sanitize the industry. What this means is that it is going to put a seal of approval on the sector and it could bring in more investors as the MFIs will be a sector recognized by law,” he said.
However, given recent developments in the banking sector where a number of banks have closed shop and were found to have been abusing depositors’ funds, the RBZ would need to strengthen its surveillance arm to ensure that MFIs do not fall into the same trap.
The decision to grant MFIs authority to take deposits from the public is a step towards improving liquidity flows and ensuring that people do not keep their money under pillows and mattresses with the catch being the interest that they are going to offer on deposits.
New Ziana

MDC-T endorses draft Constitution

MDC-T ENDORSES DRAFT CONSTITUTION

Harare, July 28, 2012 (New Ziana) – The MDC-T on Saturday endorsed the draft Constitution which negotiators from the three political parties in the inclusive government recently produced saying it reflects the wishes of the people and should go to a referendum.

The management committee of the Parliamentary Select Committee (Copac) last week produced a draft Constitution which it handed over to the principals of the three parties in the inclusive government.

MDC-T spokesperson Douglas Mwonzora told journalists the party's national executive, which met to discuss the document earlier Saturday, was “satisfied” with the draft.

“After extensive deliberations, the executive committee was satisfied that the draft constitution essentially captures the views of the people of Zimbabwe and represents an incremental gain in the democratization process,” he said.

The national executive is expected to recommend the draft to the party's national council at a meeting scheduled for August 3.

Mwonzora said while the MDC-T could not get all its views into the proposed supreme law, the party respected the will of the people.

“The party resolved that the people of Zimbabwe must be given opportunity to decide on the draft through a referendum,” he said.

He reiterated that some aspects of the Constitution had to be negotiated as people expressed divergent views on some issues.

While the two MDC formations have formally endorsed the draft Constitution, Zanu PF has said it will announce its final position on Wednesday.

The Zanu PF politburo met in a marathon 12 hour long meeting on Friday dissecting the draft and it is generally satisfied with it.

Spokesperson Rugare Gumbo said there were some technical issues which the party wanted addressed.

The draft has however come under fire from some stakeholders who argue that it does not reflect the views of the people.

Mwonzora said critics should take time to study the document and compare it with other Constitutions.

“It is the best document so far since 1986. This Constitution has the largest Bill of Rights on the African continent,” he said.

New Ziana

Zim releases US$1 million for Tokwe Murkosi relocations

GOVT RELEASES US$1 MILLION FOR TOKWE-MURKOSI RELOCATIONS
Harare July 27, 2012 (New Ziana) –The Zimbabwe government has released US$1 million for relocating the first batch of 190 families to pave way for construction of Tokwe-Murkosi Dam in Masvingo province, an official said Friday.
The government recently secured about 68 000 hectares of land at the Nuanetsi Ranch from the Development Trust of Zimbabwe (DTZ) to relocate nearly 4 000 families affected by construction of the dam.
The total cost to relocate and compensate affected families is estimated at US$19 million.
Speaking at a meeting on relocation of families affected by Tokwe-Murkosi dam, Masvingo provincial administrator Felix Chikovo said about 400 families should be relocated before the end of the year.
“We have been told that US$1 022 942 has been deposited into our account and we hope the money will reflect next week to start the relocations,” he said.
“All the affected families will be compensated accordingly. They will also get transport assistance to the new place.”
Chikovo said each family would get 1, 5 hacters under irrigation, 3.5 hectares dry land and 13 hectares grazing land.
Local Government, Rural and Urban Development Minister Dr Ignatius Chombo said the affected households would also receive tillage assistance.
“Government will also assist the families with inputs and tillage since the ground will be still too hard.
“We are not just displacing people. We are aiming for sustainable food security and rural development for the people,” he said.
Chombo said the government was grateful to the DTZ for providing land.
“We are very grateful to DTZ for providing us land to resettle the displaced families and we hope the spirit will go to other corporates,” Chombo said.
Masvingo provincial governor Titus Maluleke said the irrigation scheme would incentivize people to consent to relocation.
“The dam will provide economic benefit to the people and irrigation should be made available as soon as possible to persuade them move to the new place.
“In most irrigation schemes one family only has 0.1 hectares of irrigable land so what is offered here will actually motivate people to relocate,” he said.
Also present at the meeting was Zanu PF politiburo member Dzikamai Mavhaire and the party provincial chairperson Lovemore Matuke.
On completion at the end of 2013, Tokwe-Murkosi Dam is billed to become Zimbabwe's largest inland dam with a capacity of 1, 8 billion cubic metres. The dam will irrigate about 25 000 hectares and its flood area straddles over 9 600 hectares.
New Ziana

WFP gearing to rpovide food relief

WFP GEARING TO PROVIDE FOOD RELIEF
Harare July 27, 2012 (New Ziana) -The United Nations World Food Programme (UNWFP) on Friday said it is gearing up to respond to the rise in food needs in Zimbabwe due to erratic rainfall and dry spells that contributed to low cereal production this year.
According to the just published Zimbabwe Vulnerability Assessment (ZimVac), an estimated 1.6 million people are likely to need food assistance during the peak of the coming “hunger season”, a 60 percent increase from the one million that needed assistance last season.
Zimbabwe produced 1 076 772 metric tonnes this year which is a third lower than last year and the lowest since 2009.
WFP country director Felix Bamezon said assistance would include food and funds.
“Our field staff is already reporting signs of distress in rural areas, including empty granaries and farmers selling off their livestock to make ends meet,” he said.
Bamezon said cash transfers would be used in areas where there were functioning markets so people had the flexibility to choose where and from whom to purchase their cereals.
Meanwhile the United States Agency for International Development (USAID) has confirmed a contribution of US$18 million for purchasing vegetable oil and pulses.
The ZimVac report identified Masvingo, Matabeleland North and South, and parts of Mashonaland, Midlands and Manicaland as the worst affected areas.
The WFP, the world's largest humanitarian agency fighting hunger worldwide, feeds an average of 90 million people from more than 70 countries each year.
New Ziana

Zim to stamp foot on interest rates

GOVT TO STAMP FOOT ON INTEREST RATES
Harare July 26, 2012 (New Ziana) –The Zimbabwe government will soon compel banks to pay interest on deposits held with the financial institutions while a ceiling will be set on lending rates, Finance Minister Tendai Biti has said.
Banks have been accused of failing to promote savings since the adoption of multiple foreign currencies in 2009 due to their failure to award interest on deposits.
On the other hand the institutions are levying high bank charges and exorbitant rates on loans.
“We are going to create two situations, one a mandatory situation where there will be an interest on all deposits and two, a mandatory situation where we will put an upper ceiling on lending rates,” Biti said in the House of Assembly on Thursday while pushing for adoption of his fiscal policy review statement.
“This business of money that is sold at above 30 percent when we are using the US dollar is criminal, so we are not going to allow that. We are going to act boldly and swiftly in the next few weeks to deal with this issue,” he added.
The country's savings rates has averaged 0-5 percent while lending rates have been ranging between 9.5 percent and 30 percent per annum, which  discouraged productive borrowing by the cash strapped industry.
In the Medium Term Plan of 2011 to 2015, the government is targeting to raise savings to 20 percent.
While the government and the central bank have exhorted banks to address the situation, moral suasion appears to have largely failed leading the authorities to mull forcing banks to toe the line.
In the mid term fiscal policy statement presented last week, Biti however noted that interest rates appeared to be softening in the last few months but remained too high.
Biti, who described the practice as “voodoo banking”, did not however announce levels at which the interest rates on both deposit and loans would be pegged.
Over the years depositors have lamented the high bank charges which eroded their meagre savings forcing them to withdraw all their monies from banks.
“You put your money in a bank and no interest is put on the deposit and then you are called four weeks later to come and top up because your bank balance is in the negative,” said Biti.
Most banks charge on average US$2 per withdrawal on personal accounts.
Through the Bankers Association of Zimbabwe the banks have defended their position arguing that their charges were in line with those of the region.
Biti said there was a banking crisis in Zimbabwe which the government would address through various amendments to the Banking Act.
New Ziana

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