Microfinance institutions have emerged as important cogs in the Zimbabwean economy, which has grown to be largely informal over the past two decades.

The country has a vibrant MFI sector, which comprises of 189 registered firms, with a loan portfolio was $176,5 million of which business loans amounted to $46,3 million, agriculture loans stood at $40,5 million while other loans were $39 million.

But with questions over whether or not local MFIs are playing their role in reducing poverty and spurring economic development, the Government is moving to ensure tighter regulation of the finance providing entities.

The Reserve Bank of Zimbabwe has long stated that MFI are an important pillar of financial inclusion, holding capacity to provide a wide range of services to the previously marginalised and unbanked sections of the population.

But MFI lending figures as the end of 2018 show that these entities extended $50,5 million for consumptive purposes in the nine months to September, representing a third of the industry’s loans in issue.

To this extent the authorities are looking to tighten up regulation of the sector to ensure that the effectively play their role.

Zimbabwe’s Parliament has announced that next week it will invite public input into the proposed Microfinance Amendment Bill.

The Bill – if and when enacted into law – will augment the current supervision and regulation of Microfinance Institutions (MFIs).

The Parliament will conduct public hearings on the Microfinance Amendment Bill from Monday to Thursday next week in Harare, Mutare, Masvingo and Bulawayo.

“The public, interested groups and organizations are invited to attend these consultations. Written submissions and correspondences are (also) welcome,” according to a public invite from the Parliament.

The Microfinance Amendment Bill stating that the Bill will amend the Microfinance Act (Chapter 24:30) extending the tenure of licences to a five-year period.

The Bill also reduces the variety of institutions that can carry on microfinance business under the Act.

The current Act defines 4 different types of institutions namely corporate financiers, credit-only microfinanciers, deposit-taking microfinanciers and money-lenders, who provide loans and credit but are not micro-financiers, something the Bill is looking to amend.

“To reduce confusion and overlapping, the Bill will amend the Act to recognize only two institutions: credit-only microfinance institutions (namely companies that provides loans and credit to small-scale borrowers); and deposit-taking microfinance institutions, (namely companies that accept deposits from small-scale businesses and members of lower-income groups),” reads part of the Bill.

The current Microfinance Act was promulgated in 2013.