20 January 2018
   
Tsvangirai golden handshake confirmed
DisGrace sneaks out three luxury cars
ED cuts Bob Singapore crew from 38 to 22
Call for Diaspora Minister and MPs
ED so over confident it worries him
Priscilla demands coup ‘killings’ details
CBD maize roasting must end now: Min
Tsvangirai faces disgraceful exit: Judge
MORE NEWS
ZTA targets domestic tourism
SOE DEBATE: Privatise most parastatals
MORE BUSINESS
Delight as ZBC 'Iron Lady' suspended
Sulu arrested over $4,000 child support
MORE SHOWBIZ
Mapeza targets CAF CL group stages
Tendai Ndoro special - says Ajax coach
MORE SPORTS
Elections: Not a moment to be lost
A view beyond the Zimbabwe coup
MORE OPINION
 
Mnangagwa off to Davos empty handed
Economy: the need for a paradigm shift
MORE COLUMNISTS
 
 
RBZ sets $5m capital requirement for microfinance firms
13/05/2013 00:00:00
by Zvamaida Murwira I Herald
 
Reforms ... RBZ chief Gideon Gono
 
RELATED STORIES
Bank profits dive as bad debts top $500m
Cattle bank takes first moo deposits
Banks to be compelled to list on ZSE: Biti
Indigenisation: why banks deserve caution
Biti cracks whip on 'undemocratic' banks
RBZ: Kingdom Bank not collapsing
Bank ownership deals null and void: RBZ
Sanctions lift a major boost: Agribank
Stanchart confirms ownership talks
Gono rules out Stanchart closure
NIEEB threatens to close Stanchart
ZB Financial Holdings merges key units
Stanchart posts US$24 million profit
Barclays equity deal gets thumbs up
CBZ Bank launches in-store ATMs
Barclays Africa chief to meet Kasukuwere
Treasury warns banks over interest rates
Norwegian firm moves into NMBZ Holdings
MBCA Bank profits up 48 percent
Stanbic bank insists on majority control
RBZ rules out bank capital review
Stanchart to submit empowerment plan
JSE-listed Vunani moves into Zimbabwe
CBZ profits top $45 million, up 48 pc
Stanchart eyes more Zim equity deals

THE Reserve Bank of Zimbabwe plans to raise minimum capital requirements for microfinance institutions from the present US$25 000 to US$5 million as part of a cocktail of measures the central bank said are aimed at protecting the public.

Central Bank Governor, Dr Gideon Gono said the new requirements would be brought into effect once the Micro-Finance Bill, now before Parliament comes into effect.

Dr Gono said this yesterday while giving oral evidence before a Parliamentary portfolio on Budget, Finance and Investment Promotion on the central bank’s views on the proposed legislation.

Bulawayo South MP, Eddie Cross (MDC-T) chaired the committee on behalf of Goromonzi South MP, Paddy Zhanda (Zanu PF), who was said to be away on business.

“The deposit taking function of micro-finance banks requires that they be subjected to more stringent regulation and supervision, including a minimum capital requirement of US$5 million as opposed to US$25,000 currently applicable for credit only micro-finance as that is designed to protect depositors,” said Dr Gono.

“The US$5 million is not required all at once, it is staggered for say five years meaning it can actually come from their profits.

“This is because those who borrow from them are vulnerable people like civil servants.”

He said there were 164 micro-finance out of 257 financial institutions the RBZ supervised constituting 64 percent hence it was critical to have regulations dedicated towards the affairs of the greatest number of players as what the Finance ministry sought to do.

Unethical and illegal conduct by the institutions, said Dr Gono, have in the past been reported in the media, some of which include charging usurious interest rates as high as 50 percent per month on loans advanced to the public.

He said they have also operated pyramid schemes where unsustainably high returns were promised  investors, making desperate borrowers sign documents ceding their immovable properties to the lender and selling or disposing borrowers’ properties.

“Since the advent of multi-currency system, interest rates charged by money lenders are currently unregulated, leaving borrowers entirely at their mercy, under the existing legislation, authorities are not sufficiently legally empowered to adequately supervise operations and to take corrective and punitive action to protect the public,” he said.



Advertisement

Dr Gono said the regulatory and supervisory framework of the Banking Act was mainly suited for mainstream banks and not micro-finance banks who require a separate regulatory framework.

He said the proposed Micro-finance Bill sought to provide stronger safeguards and measures to protect borrowers and depositors.

Appearing before the same committee, the Zimbabwe Association of Micro-finance Institution chief executive officer, Mr Godfrey Chitambo said while the Bill was progressive, a number of clauses needed clarification.

He said the Bill tended to favour the borrower than the lender in many respects as the lender could lose both the principal amount and interest if he was found wanting.

“The tone and effect of the Bill is tilted too much in favour of the borrower.

“The burden is too much on us so much that if a borrower prove that we did not inform him enough we will lose both the money we lended and the interest,” he said.

“The Bill makes no attempt to provide recourse to money lenders who are defrauded by cunning literate clients,” he said.

The Zimbabwe Stock Exchange also gave its views on the Securities Amendment Bill.


 
Email this to a friend Printable Version Discuss This Story
Share this article:

Digg it

Del.icio.us

Reddit

Newsvine

Nowpublic

Stumbleupon

Face Book

Myspace

Fark

 
 
 
comments powered by Disqus
 
RSS NewsTicker