Microfinance is supposed to provide developmental finance. However, due to serious economic challenges, people are resorting to microfinance for consumptive purposes.
A Harare economist, who refused to be identified because he works for the government, told The Zimbabwean that microfinance institutions were supposed to help small businesses with funding.
“Microfinance institutions are supposed to provide affordable finance for the small players by asking for less stringent security requirements at reasonable interest rates. The current situation in the country makes life very hard for small and medium enterprises,” the economist said.
Many microfinance institutions have been operating like loan sharks.
“They charge as much as five percent per month which is an incredibly high interest rate. Many people have gone bankrupt as a result of these practices.
Instead of getting a helping hand, people become poorer,” said the analyst.
The Microfinance Bill is currently before Parliament and has been designed to ease the funding challenges faced by SMEs.
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