RBZ licenses 10 more Microfinanciers

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RBZ licenses 10 more Microfinanciers

Business herald: 11 APR, 2018 – 00:04    Dr Sanderson Abel
Financial institutions play a pivotal role in the granting of credit to the various sectors of the economy.

A bank is just like a heart in the economic structure and the capital it provides is like blood in it. As long as blood is in circulation the organs will remain sound and healthy.

If the blood is not supplied to any organ then that part would become useless, so if the finance is not provided to any economic sector, it will be destroyed.

The availability of credit is important in every economy since households and firms are not in a position to generate enough resources on their own. Credit, which is the pivot for financing of business enterprise serves as an essential, facilitating agency in the primary economic functions of production, exchange, consumption and distribution.

In its simplest sense finance refers to those activities involved in seeing that an individual or organisation has the resources with which to pay its bills promptly

In their endeavour to provide funding to the various sector of the economy, banks develop various products to suit their customer needs. It is important for bank clients to understand these various products so that they approach their various banks with the knowledge of the type of product they require for them to derive maximum value from the credit products provided.

There are different types of financing that you can choose depending with the agreement with your bankers. For example, in acquiring business equipment, fixtures and fittings, you can choose to finance the acquisitions through an industrial hire purchase, leasing or a term loan. Some of the credit products offered by the banking sector are discussed below.

Term Financing: This type of loan is availed by the borrower to acquire fixed assets (immovable properties i.e. land and buildings and vehicles for commercial use). The loan carries a predetermined length of time (tenure), with repayments done in instalments.

Lease Financing: This type of facility helps the borrowers to acquire equipment’s and machineries for their businesses on lease. This type of finance is long Term in nature and as such, the repayment is made in instalments.

Overdraft (OD): This is a short term facility which is granted to the borrower to enable him meeting his day to day funding needs; like payment of salaries, utilities and purchases of inventories etc. An agreed limit is sanctioned by the bank and the borrower is allowed to draw that amount through his current account.

Revolving Credit: This type of loan is also short-term in nature and is used to meet short-term funding requirements of the borrowers. This type of loan does not have a fixed number of payments, as in the case of instalment loan.

Cash Finance and Running Finance are types of revolving loans. Once the loan limit is approved, then the borrower is free to withdraw amounts to the extent of that limit. The borrower can withdraw and repay the amount as many times as he wishes to; but he has to pay mark-up on the amount which he has actually used.

Letter of Credit (LC) or Documentary Credit (DC): Letter of Credit is a written undertaking by a financial institution in favour of the supplier/seller to pay him the amount of imported/purchased goods, in case the actual importer/buyer fails to pay

Unsecured financing: Unsecured loans are those where the banks do not demand tangible securities such as land, building, fixed/current assets, tradeable inventory etc. as security; whereas, in secured financing, the banks demand any of the security as mentioned above. Secured financing is also called collateralised financing.

Credit provision by the banks to their clients through the various channels outlined above gives an obligation towards the borrower to dutifully service the obligation.

Failure to honour that obligation will disturb the whole credit system leading to reduced resources to other potential borrowers. In other words, the potential funding by the banking system is seriously reduced. Resultantly, the problem of credit impairment drags on the economy in the following ways: disintermediation of bank-system lending caused by the erosion of banks’ profitability; stagnation of economic resources, such as labour and capital, in fields with low productivity and cautious behaviour of corporations and consumers due to a decline in confidence in the financial system.

It is now an indisputable fact that economies are dependent on their growth and development on the provision of credit by the financial sector. Corporates, individual and other players provide credit to one another with the banks lying at the centre of the system. A cycle of credit is thus created in an economy where each economic agent is one way or the other in receipt of credit from another directly or indirectly. Any hiccup within the cycle might end up disturbing the smooth flow of resources among the economic agents.

On a broader macroeconomic level, this would translate to economic stagnation as some sectors become grappled with working capital and capital challenges as they fail to access loans and overdrafts from the banks while those who access the resources fail to repay as a consequence of the high cost of the funds.

Dr Sanderson Abel is an Economist. He writes in his capacity as Senior Economist for the Bankers Association of Zimbabwe. For your valuable feedback and comments related to this article, he can be contacted on abel@baz.org.zw or on numbers 04-744686 and 0772463008.

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Mobile Usoni: Here’s to a mobile future

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Mobile Usoni: Here’s to a mobile future

The Monthly Financial Sector Bulletin (MFSB) recently introduced “The Microfinance Interview”, a monthly question-and-answer feature through which it engages with key stakeholders of the sector such as microfinancial institutions (MFIs), funders, service providers, development partners and regulators amongst others on issues of topical and mutual interest.

In the first interview, NewsDay’s financial columnist and editor of the MFSB Omen Nyevero Muza (ONM) caught up with Cameron Goldie-Scotie (CGS), the chief executive officer of Musoni Services, a Netherlands-based provider of a core-banking system used by 17 financial organisations in Zimbabwe, and discussed their current work and plans in the country.

ONM: What’s Musoni System and who is behind it?

CGS: Musoni is a multi-award winning core-banking system used by more than 75 organisations in 14 countries around the world. The software has been consistently proven to help financial organisations improve efficiency, reduce costs, and expand outreach into the rural areas where the majority of the unbanked live. Musoni Services is a Dutch company based in Amsterdam. Before starting Musoni Services, the team founded the world’s first 100% mobile microfinance institution in the world in Kenya in 2009, now serving over 40 000 clients.

As a result, we have first-hand knowledge of what it’s like to run a microfinance organisation and challenges faced in finding the perfect core banking system.

ONM: For a system that is from the Netherlands, what’s the origin of the name Musoni, a word which also exists in the Shona language in Zimbabwe?

CGS: Musoni stands for ‘Mobile Usoni’, which means “mobile future” in Swahili. We like to think that our use of technology represents the future of microfinance, and we take our clients on a technology journey.

ONM: What types of organisations are using this service in Zimbabwe and how many are they currently? What’s the international profile of the product like?

CGS: We currently work with 17 financial organisations in Zimbabwe, ranging from young companies just starting out, to more established organisations like Microking (now Microcred), Virl, Inclusive Financial Services, First Choice and many others. Globally we work with over 75 organisations across 14 different countries, the majority in sub-Saharan Africa.

ONM: How long has the system been in Zimbabwe and have you established any partnerships yet?

CGS: We first started working in Zimbabwe in early 2014 and after an extensive request for proposals process, we were selected as the first preferred and recommended software provider by Zimbabwe Association of Microfinance Institutions (Zamfi). We also work with the Reserve Bank of Zimbabwe, mainly through the Financial Inclusion Thematic Working Groups such as the Microfinance Thematic Working Group.

Aside from that, from a technical perspective, we have integrated with local players such as EcoCash and PayNet, enabling MFIs to process SMS campaign messages such as payment reminders across all the mobile networks.

ONM: What challenges have you faced trying to penetrate the Zimbabwean market to service MFIs?

CGS: The Zimbabwean market is obviously challenging, as MFIs have less access to external debt financing than we see in other markets. This, of course, makes it harder for them to grow quickly at a sustainable rate. All the same, I believe this is where technology can make a real difference.

Using mobile money, tablet apps and credit scoring makes it more affordable to grow client numbers in previously hard-to-reach areas and we believe we can help MFIs to stay competitive and expand financial inclusion.

ONM: What would you say are your opportunities in relation to Zimbabwe?

CGS: A large proportion of the population still has no access to financial services. We are a social impact company first and foremost; so, improving access to financial inclusion is a core goal for us.

This is also a huge opportunity for Zimbabwean MFIs and those using technology like Musoni system will stand the best chance of growing rapidly in the coming years. We’re also excited and privileged to work with both Zamfi and the Reserve Bank of Zimbabwe.

ONM: We understand that you have just released the latest edition of Musoni System. What makes it different from the previous version?

CGS: We continuously work on enhancing the functionality of our system through feedback from our clients, potential clients and ongoing research.

To this end, we have just released the latest version of the Musoni System. We have added a lot of really exciting new functionality, including a custom report builder, the ability to build custom document templates (like loan contracts), send emails to clients and much more.

ONM: There are several management information systems on offer in Zimbabwe for MFIs. What’s Musoni’s unique selling proposition?

CGS: We’re the only provider that offers the full suite of technology to all our MFIs, including EcoCash integration, the SMS module, the tablet application, credit scoring and more.

Most providers offer just a core banking system and force the MFI to integrate with other vendors or pay more for additional features. We include it all as standard functionality, making it easier than ever for organisations to start benefiting straight out of the box.

ONM: We understand the Musoni System is a winner of an international award? Can you tell us about this award in terms of who conferred it and what’s it for?

CGS: Yes! We recently won the BBVA Financial Inclusion Special Award in recognition for our work in improving both the quality and availability of financial services around the world. The award was judged by a panel including judges from Bill and Melinda Gates Foundation, BBVA and the IIF Conference.

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