HARARE – Businessman and former ABC Holdings chairman Oliver Chidawu has bounced back into the banking sector after Heritage Financial Services — together with other seven microfinance institutions was granted a green light by the central bank to begin operations.
Reserve Bank of Zimbabwe (RBZ) registrar of financiers said, of the eight, five were moneylenders while three were credit only MFIs.
“This brings the number of institutions authorised to conduct business of providing loans in terms of the Microfinance Act (chapter 24:29) to 163 as at March 31, 2016,” the central bank said.
Chidawu founded and manages the Kuchi Group of companies that is active in building and electrical contracting.
He is also a major shareholder in Bitumen Construction Services and Heritage Insurance Company.
The respected businessman, who sits on listed and private companies boards in various industries including financial services, construction, manufacturing, waste management, was a founding shareholder and director of Heritage Investment Bank that merged with First Merchant Bank in 1997. Other MFIs that were licensed by the central bank include Wedb Financial Services, Mircohub Financial Services, Hayroadic Investments, Green Leaf Finance, High One Investments, Cash Planet and Dominiumfin.
This comes as the apex bank recently upgraded three MFIs to the status of Microfinance Banks to facilitate for lower tier banking institutions and encourage financial inclusion.
Zimbabwe’s microfinance sector, which is on a growth path after its loan book jumped 13 percent to $225,13 million in the year to December 2015, has seen more players applying for licensing with disposable incomes shrinking as Zimbabweans turn to borrowing to make ends meet.
However, the MFIs recorded a decrease in licensed players at the close 2015 from 155 as at September 30 2015 to 152 in December as tough economic conditions hit the sector.
On the back of high default rates MFIs record, the central bank has projected that more players in the sector will have folded by end of year as economic conditions deteriorate in the country. MFIs, as a survival strategy — are responding to the call by the central bank to provide funding to the productive Small to Medium Enterprise’s and smallholder farmers.
The RBZ has also cautioned MFIs to strictly vet their clients as the sector’s portfolio risk — at 10,72 percent for the year ended December 2015 — remains above the prudential regional benchmark of five percent.
At the end of 2015, MFI lending was skewed towards consumption at $101,52 million, which constituted 54,24 percent of the sector’s total loans.
A number of MFIs continue to focus on consumption lending, which is dominated by government employees, to take advantage of the government’s direct deduction facility in an effort to manage default risk.
The central bank has also called for MFIs to reorient their lending portfolios towards productive lending, with the sector’s 2015 year-end figures indicating improvement in productive lending from 29,11 percent in 2013 to 45,76 percent in 2015.