University of Zimbabwe

The role of microfinance institutions in poverty alleviation in developing

economies : the case of Zimbabwe

By

Student: Munyaradzi Chakatsva

Reg. No.: R9917565

August 2012

Dissertation submitted in partial fulfillment of the requirements for the degree of

Master of Business Administration, Graduate School of Management, University
of Zimbabwe
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Supervisor: Mr S. M. Chimwara

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DECLARATION

I, Munyaradzi Chakatsva, do hereby declare that this dissertation is the result

of my own investigation and research, except to the extend indicated in the
Acknowledgements, References and my comments included in the body of the
report, and that it has not been submitted in part or in full for any other degree
to any other University.

Student’s Signature Date

Supervisor’s Signature Date

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DEDICATION

To my Lovely Wife Vimbayi and our daughter Makanaka Emily!!!

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ACKNOWLEDGEMENTS

Very special thanks to my dissertation supervisor Mr. S. M. Chimwara for

guidance and advice that he gave. I am also grateful to Mrs. C. Tsikirayi for the
valuable dissertation clinics which proved to be vital as referencing material
throughout the process of conducting this study.

I am also grateful to my close friends Albert Munhamo, Clive Kopera and

Innocent Madziva for their encouragement, support and contribution to this
piece of work. Last, but not least I do appreciate my wife Vimbayi and our
daughter Makanaka, who endured long hours without their father as I attended
to this project.

I am truly thankful to you all, may the Lord Almighty bless you.

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ABSTRACT

One critical aspect faced by developing economies the world over is that of
poverty and economic security. The issue is so critical to such an extent that its
eradication is mentioned as the first of the United Nations initiated Millennium
Development Goals. The microfinance sector is seen as one powerful tool that
can be used to reduce poverty especially in developing economies. The major
question at hand is whether microfinance institutions are playing their role is
reducing poverty and spurring economic development. The overall aim of this
research project is therefore to ascertain the role of microfinance institutions in
poverty alleviation in developing economies, focusing on Zimbabwe.

The research objectives and questions are guided by the research topic with
specific focus on the products and services offered by MFIs, their business
conditions, their impact as well as legislations that govern their conduct. Two
sets of questionnaires were used to collect data from sixty randomly selected
MFIs (Fifty MFIs and ten SACCOs) as well as one hundred randomly selected
MFI clients. In as much as MFIs have the products and services that assist in
alleviating poverty, the challenge is that the very poor people in rural and urban
areas are not being reached and the products and services are too expensive
to such an extend that the poor people are being sunk into more poverty.

Regulatory authorities are recommended to come up with interest rate caps on

all MFIs to avoid borrowers being charged unsustainable interest rates. They
are also recommended to ensure MFIs adopt internationally best practices for
microfinance in the conduct of their business. APEX bodies like ZAMFI are
encouraged to institute capacity building programs for MFIs to strengthen and
equip the institutions so that they are in compliance with Laws and Regulations
governing their conduct. MFIs are also encourage to offer capacity building
training sessions to their clients as well as broaden their product offerings to
include micro insurance.

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TABLE OF CONTENTS

DECLARATION ..............................................................................................................i
DEDICATION ............................................................................................................... iv
ACKNOWLEDGEMENTS .............................................................................................. v
ABSTRACT .................................................................................................................. vi
TABLE OF CONTENTS ............................................................................................... vii
LIST OF TABLES ......................................................................................................... xi
LIST OF ABBREVIATIONS ......................................................................................... xii
CHAPTER ONE ....................................................................................................................... 1
1.0 Introduction ............................................................................................................. 1
1.1 Introduction to the study .......................................................................................... 1
1.2 Background to the study .................................................................................... 2
1.2.1 Poverty and Economic Insecurity in Developing Economies .............................. 2
1.2.2 Overview of the Micro Finance Sector ............................................................... 3
1.2.3 Micro Finance and the Millennium Development Goals ..................................... 3
1.2.4 The Zimbabwean Case ........................................................................................ 5
1.2.5 Micro Finance Policy in Zimbabwe ................................................................... 5
1.2.6 Micro Finance Institutions in Zimbabwe ............................................................ 6
1.3 Research Problem ............................................................................................ 8
1.4 Research Objectives ........................................................................................... 10
1.4.1 Research Questions .......................................................................................... 10
1.5 Research Proposition............................................................................................ 11
1.6 Justification for Research ................................................................................ 11
1.7 Scope of Research ............................................................................................... 11
1.8 Ethical Issues ....................................................................................................... 12
1.9 Limitations to the study ....................................................................................... 12
1.10 Dissertation Structure........................................................................................ 13
1.11 Chapter Summary ........................................................................................... 14
CHAPTER TWO .................................................................................................................... 15
2.0 LITERATURE REVIEW ........................................................................................ 15
2.1 Introduction ........................................................................................................... 15
2.2 What is Microfinance?........................................................................................... 16
2.3 What are (MFIs) Microfinance Institutions?............................................................ 17
2.4 What is poverty? ................................................................................................... 18
2.5 Development and Expansion of the Microfinance Industry ..................................... 19
2.6 Regulation of Microfinance Institutions/ Sector ...................................................... 21
2.6.1 Rationale for Regulating the Microfinance Sector ............................................... 21
2.6.2 Reserve Bank of Zimbabwe Circular to Micro lending and Microfinance
Institutions .................................................................................................................. 22
2.6.3 Section 3(3) of Banking Act [Chapter 24:20] in Zimbabwe .................................. 23
2.7 Sustainability of (MFIs) Microfinance Institutions ................................................... 23
2.8 Previous Microfinance Surveys in Zimbabwe ........................................................ 25
2.8.1 Zimbabwe National Survey on Microfinance December 2005 to March 2006 ... 25

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 2.8.2 MICROFINANCE SECTOR RECOVERY STUDY IN ZIMBABWE .................... 26
2.9 MFIs and Poverty Alleviation in Developing Economies ................................... 27
2.9.1 Sinapi Aba Trust (SAT) – Ghana ..................................................................... 27
2.9.2 Grameen Bank: Micro-Credit and Poverty Alleviation Program in Bangladesh . 29
2.9.3 The CETZAM Case – Zambia .......................................................................... 30
2.10 Microfinance Impact Studies in Developing Economies ....................................... 31
2.10.1 An assessment of Zambuko Trust, Zimbabwe ........................................... 31
2.10.2 Development Impact Study: South Asia ...................................................... 34
2.11 MFIs and Loan Delinquency Management ....................................................... 37
2.12 MFIs and Microfinance Programs ........................................................................ 38
2.12.1 Insurance Role of Microfinance Programs ........................................................ 38
2.12.2 Micro Savings Programs and potentiality of the poor ........................................ 39
2.12.3 Micro insurance programs to the poor and economic insecurity ........................ 40
2.12.4 Impact of Micro insurance ................................................................................ 41
2.13 A Critical Assessment of Microfinance as a Poverty Alleviation Tool .................... 42
2.13.1 Impact on poverty reduction ............................................................................. 42
2.13.2 Supply Side and Demand Side Factors ............................................................ 44
2.13.3 Returns to Investment and Interest rates .......................................................... 45
2.13.4 Contributions of Microfinance Institutions on poverty reduction ................... 46
2.14 Criticism of microfinance ..................................................................................... 47
2.15 Chapter Summary ............................................................................................... 48
CHAPTER THREE................................................................................................................. 49
3.0 Research Methodology ......................................................................................... 49
3.1 Introduction ..................................................................................................... 49
3.2 Research Design ............................................................................................ 49
3.3 Research Philosophy ...................................................................................... 49
3.3.1 Positivism ....................................................................................................... 50
3.3.2 Interpretivism .................................................................................................. 50
3.3.3 Realism ........................................................................................................... 51
3.4 Research Strategy .......................................................................................... 51
3.4.1 Survey ............................................................................................................ 52
3.4.1 Why the Survey Strategy? ............................................................................... 52
3.5 Population and Sampling Techniques .............................................................. 53
3.5.1 Population ....................................................................................................... 53
3.5.2 Sampling Techniques ...................................................................................... 54
3.5.2.1 Sampling Design ........................................................................................... 54
3.5.2.2 Sample Size.................................................................................................. 54
3.5.2.3 Sampling Procedure .................................................................................... 55
3.5.2.4 Probability Sampling ....................................................................................... 55
3.5.2.5 Non Probability Sampling ................................................................................ 56
3.5.2.6 Justification of Sampling Method ..................................................................... 57
3.6 Data Collection Methods ................................................................................. 57
3.6.1 Primary Data ................................................................................................... 58
3.6.2 Secondary Data .............................................................................................. 58
3.7 Research Procedure ....................................................................................... 59
3.7.1 Data Collection................................................................................................ 59

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 3.7.1.1 Questionnaires ................................................................................................ 59
3.7.1.2 Questionnaire Design...................................................................................... 60
3.7.1.3 Questionnaire Pretesting ................................................................................. 61
3.7.1.4 Questionnaire Administration........................................................................ 62
3.8 Interviews....................................................................................................... 62
3.10 Research Limitations ....................................................................................... 62
3.11 Chapter Summary ............................................................................................... 63
CHAPTER FOUR .................................................................................................................. 64
4.0 Results and Discussion ................................................................................... 64
4.1 Introduction ..................................................................................................... 64
4.2 Response Rate ............................................................................................... 64
4.3 DEMOGRAPHICS INFORMATION/SECTION ................................................. 65
4.3.1 Gender and Microenterprises Distribution ........................................................ 65
4.3.2 Age of the respondents ................................................................................... 66
4.3.1.3 Qualifications / Levels of education .............................................................. 67
4.3.1.4 MFIs Years in operation............................................................................ 68
4.4 BUSINESS INFORMATION/SECTION ............................................................ 69
4.4.1 Purpose of Loans and Advances ..................................................................... 69
4.4.2 Monthly Interest Rates and other Administration charges ................................ 71
4.4.3 MFIs Business conditions and Client Satisfaction levels .................................. 73
4.4.4 MFIs Service delivery – Turn Around time ....................................................... 75
4.4.4.1 Training and Advisory Services ................................................................... 76
4.5 Loan Delinquency and Management ............................................................... 77
4.5.1 Default rate ..................................................................................................... 77
4.5.2 Clients Arrears Frequency and Management ................................................... 79
4.5.3 Clients Borrowing Frequency........................................................................... 81
4.6 MFIs Impacts on Individuals and Microenterprises ........................................... 82
4.6.1 Clients’ Opinion on MFIs and the Microfinance Sector ..................................... 82
4.6.2 MFIs Client outreach ....................................................................................... 83
4.7 Chapter Summary ........................................................................................... 85
CHAPTER FIVE..................................................................................................................... 86
5.0 CONCLUSIONS AND RECOMMENDATIONS ................................................ 86
5.1 Introduction ..................................................................................................... 86
5.2 Research Summary ........................................................................................ 86
5.3 Conclusions .................................................................................................... 87
5.3.1 Client Outreach ............................................................................................... 87
5.3.2 MFIs Business Conditions ............................................................................... 87
5.3.3 Loan delinquency and Management ................................................................ 87
5.3.4 Purpose of Loans and Advances ..................................................................... 88
5.3.5 MFIs Impact on Individuals and Microenterprises ............................................ 88
5.3.6 Demographics ................................................................................................. 88
5.3.7 Legislation on MFIs and the Microfinance Sector................................................ 88
5.4 An Evaluation of the Research Proposition ...................................................... 89
5.5 Recommendations .......................................................................................... 89
5.5.1 Recommendations to Regulatory Authorities ................................................... 89

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5.5.2 Recommendations to Microfinance Institutions (MFIs) ..................................... 90
5.5.3 Recommendations to APEX Bodies, ZAMFI, ZAMLA ....................................... 91
5.6 Areas of further study ...................................................................................... 91
5.7 Chapter Summary ........................................................................................... 91
REFERENCES ........................................................................................................... 92

Appendices .............................................................................................................. 100

Appendix No 1: Articles Showing Auctioning of Property ............................................ 100
Appendix No 2: List of Registered MFIS..................................................................... 101
APPENDIX 3: SCHEDULE OF REGISTERED SACCOS UNDER NACSCUZ ............ 105
APPENDIX No 4: Interview Guide Questions ............................................................. 107
Appendix No 5: RBZ Circular to MFIs and Money Lending Institutions ....................... 109
Appendix No 6: Cancellation of McDowells International ‘s Lending License ............. 110
Appendix No 7: Questionnaire Covering Letter........................................................... 111
APPENDIX No 8: Client Questionnaire ...................................................................... 112
APPENDIX No 9: MFI Questionnaire ........................................................................ 118

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LIST OF TABLES

Table Page

Table 1.1: Distribution of Microfinance Institutions in Zimbabwe………………7

Table 1.2: Distribution of Registered SACCOs in Zimbabwe…………………...8

Table 2.1: Microfinance Impact Studies South Asia…………………………….33

Table 4.1: Response Rate…………………………………………………………62

Table 4.2: Findings on Administration and Penalty …………………………….70

Table 4.3: Client Average Default rates from 2009 to 2011……………………75

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LIST OF ABBREVIATIONS

BNS Basic Needs Strategy

CETZAM Christian Enterprise Trust of Zambia

DFID British Department for International Development

MDGs Millennium Development Goals

MF Microfinance

MFI Microfinance Institution

NACSCUZ National Association of Credit and Savings Co-operative Union of

Zimbabwe

NBFIs Non Bank Financial Institutions

NGO Non Governmental Organization

PDL Poverty Datum Line

PPP Purchasing Power Parity

PRSP Poverty Reduction Strategy Papers

RBZ Reserve Bank of Zimbabwe

SACCO Savings and Credit Co-operative Societies

SAP Structural Adjustment Programs

SEDCO Small Enterprise Development Corporation

SMEs Small to Medium Scale Enterprises

ZAMFI Zimbabwe Association of Microfinance Institutions

ZAMLA Zimbabwe Money Lenders Association

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 CHAPTER ONE

1.0 Introduction

1.1 Introduction to the study

This study is aimed at ascertaining the role of Microfinance institutions in poverty

alleviation in developing economies, with a focus on Zimbabwe. There is a general
agreement amongst various scholars and researchers that in the right circumstances
microfinance can increase household incomes, but however, its impact on poor clients
remains controversial (Shaw, 2004, p.1247).

The world over since inception the microfinance sector or rather industry has been
aimed at helping to end poverty and spur economic development through offering
microloans. These microloans average a few dollars and help mainly impoverished
people who lack security for conventional loans. The Microfinance industry has actually
gained acceptance throughout the whole world, with the declaration of 2005 as the
‘International Year of Microcredit’ by the United Nations, the endorsement by the G8 at
the Gleneagles’ Summit and the Commission for Africa Report (2005), all demonstrated
its official support as a means of increasing access to financial services. The World
Bank and the International Monetary Fund have also embraced it as part of their
strategy for alleviating poverty (Microfinance Matters, November 2005, p.3).

Paul Wolfowitz, World Bank President, 2005, said this concerning microfinance:

“It is a powerful tool for reducing poverty. It enables people to increase their
incomes, to save and manage risk. It reduces vulnerability and allows poor
households to move from everyday survival to planning for the future”.

Nobel Prize winning economist Muhammad Yunus, who established the first micro
finance bank in Bangladesh and launched the modern micro lending movement claims
microloans have lifted millions, especially women out of poverty and spurred economic
growth. The micro lending sector started as an experiment on Bangladeshi villagers in

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the 1970s; the experiments gave some startling discoveries that turned standard
economic assumptions on their head

In February 1998, Chen Junsheng, Head of the Chinese National Poverty alleviation
project, stated that:

“Micro finance is an effective tool to reduce poverty. We should experiment with

micro finance projects in some areas and then spread these projects to other
areas. The key characteristic of micro finance operations is that funds directly
reach the poorest rural households and that the rate of repayment is high”.

1.2 Background to the study

1.2.1 Poverty and Economic Insecurity in Developing Economies

According to the estimates of Chen and Ravallion (2008), about 1.4 billion people (25.7
percent of the population) were poor in 2007 as measured by the international poverty
datum line of $1.25 per day per person in purchasing power parity (PPP) terms.
According to the same study, another 1.751 billion people (32.1 percent of the
population) were between $1.25 and $2.50 income lines, who are therefore very much
at risk of getting pushed down to poverty by negative shocks of even small order. Using
the $2.50 yardstick, a total of 3 140.2 million (60.1 percent of the population) are
suffering from the scourge of poverty and economic insecurity. Therefore, the
magnitude of the problem of poverty in the world, especially in developing economies is
overwhelming. Poverty has many implications on the poor, chief of them is economic
insecurity. Poverty makes it difficult for the poor to take ex-ante measures against
possible misfortunes. Poverty also makes it difficult for them to cope with misfortunes
ex-post when they actually befall them.

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1.2.2 Overview of the Micro Finance Sector

Microfinance has proven to be an effective and powerful tool for poverty reduction. Like
many other development tools, however, it has insufficiently penetrated the poorer
strata of society. The poorest form the vast majority of those without access to primary
health care and basic education; similarly, they are also the majority without access to
finance.

While there is no question that the poorest can benefit from primary health care and
from basic education, it is not as intuitive that they can benefit from microfinance, or that
microfinance is an appropriate tool by which to reach the Millennium goals.

The World Bank Publication on Microfinance and Poverty Reduction of 1998, highlight
that many Microfinance Institutions have tended to focus foremost on their financial
survival, and have generally been reluctant to invest substantially in evaluations. The
majority of MFIs neither determines the composition of their clientele upon intake nor
evaluates the effectiveness of their program in terms of poverty reduction. The
development and use of new tools for market analysis and evaluation suggests that
failure to monitor and evaluate can cut costs in the short run at the expense of achieving
long term social and economic goals.

It is therefore, important to evaluate the role of MFIs in poverty alleviation as well as

drawing lessons from the research.

1.2.3 Micro Finance and the Millennium Development Goals

All along, the world development agenda was dominated by the World Bank and the
IMF, who initiated the Structural Adjustment Programs (SAP) and the Poverty Reduction
Strategy Papers (PRSP). There was however a paradigm shift to some extent on the
eve of the new millennium, when the United Nations entered the scene through the
formulation of the Millennium Development Goals. The Millennium Development Goals
(MDGs) are therefore, a United Nations initiative and they were developed out of the

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eight chapters of the Millennium Declaration, signed in September 2000. Where Basic
Needs Strategy (BNS) and PRSP treat reduction of poverty and insecurity as a separate
and independent goal, MDGs move further in the same direction and define
developmental goals almost entirely in terms of specific targets regarding reduction of
poverty, hunger, malnutrition, amongst others without any reference to income level or
aggregate growth rate.

Commenting on the MDGs in July 2002, the then UN Secretary General Kofi Annan
said:

“We confront a world divided between the rich and the poor as never before in
humanity history. Around one sixth of humanity has achieved levels of well being
that were impossible to contemplate even a few decades back. At the same time
another one sixth of humanity struggles for daily survival, in a life and death
battle against disease, hunger and environmental catastrophes. In between are
around 4 billion people in developing countries who no longer live of the cliff edge
of disaster, but who remain very far away from security capabilities and material
well being enjoyed by people of the developed world”.

There are basically eight goals with twenty one targets and a series of measurable
indicators for each target. Listed below are the eight MDGs:

i) Eradicating extreme poverty and hunger

ii) Achieving universal primary education
iii) Promoting gender equality and empowering women
iv) Combating HIV/AIDS, malaria and other diseases
v) Reducing child mortality rates
vi) Improving maternal health
vii) Ensuring environmental sustainability, and
viii)Developing a global partnership for development.

Poverty eradication or rather reduction is therefore such an important component to

such an extent that it is listed as the first of the UN initiated MDGs. The Microfinance

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industry therefore enables the poor to improve their standard of living as they are
availed an opportunity to various factors of production.

1.2.4 The Zimbabwean Case

As per the SNV Netherlands Development Organization, Zimbabwe, Report on

Microfinance Sector Recovery Study (2009, p.6), Zimbabwe is home to a population of
13.2 million, of which 70% live in rural areas and at least 72% live in poverty. The
country witnessed an increase in activity by microfinance players as a reaction to a
steady decline in the country’s economic fortunes since 1997. This is basically because
microfinance tends to thrive in developing countries where there is an increase in
unemployment and poverty. As people seek to engage in informal sector activities to
survive there is a growing demand for small loans for business, education, low income
housing, agricultural inputs, micro-leasing and also for micro insurance.

A survey conducted by the National Task Force on Microfinance, between December

2005 and March 2006, highlights that only 30% of the economically active population is
assisted via the formal financial system, whereas the remaining 70% is served by the
informal sector. This is mainly through microfinance institutions, moneylenders,
relatives, friends as well as credit unions. (Zimbabwe National Microfinance Policy,
2006, p. 5).

1.2.5 Micro Finance Policy in Zimbabwe

Zimbabwe has a National Microfinance Policy which was developed in 2006 through
collaborative work by various organizations namely Government Ministries, Apex
Organizations, Non Governmental Organizations, Developmental Partners, RBZ, MFIs
and Moneylenders. The policy was aimed at coming up with a roadmap as well as a
strategic framework for the development of a sustainable microfinance sector in
Zimbabwe. In accordance with international best practice in micro finance, the policy
had its main thrust in promoting poverty alleviation and economic development.

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1.2.6 Micro Finance Institutions in Zimbabwe

The number of Microfinance Institutions in Zimbabwe is growing tremendously, as of

December 2010, the country had 105 registered MFI and the number has risen to 157,
all these under the supervision of the Central Bank, as per Reserve Bank of Zimbabwe
Monetary Policy Statement presented by the Governor Dr G. Gono in January 2012. As
of April 2012, the number had risen to 172.

There is a diversity of institutions serving as MFIs, all operating in the lower income
market segment. The country is now witnessing some commercial banks also
penetrating the market. The following provide a range of organisations which can be
classified as MFIs:

i) Banks,

Traditionally, banks have been heavily oriented towards financing private durables,
manufacturing inputs, raw materials, distribution of goods and agriculture. A number of
banks provide special credit to the tobacco industry, Zimbabwe’s main commodity
export product. Banks have however downscaled into the micro finance market
segment, two major examples being, FBC through Microplan Financial Services Private
Limited and Kingdom Bank through MicroKing Savings and Credit Company Private
Limited.

ii) Non Bank Finance Institutions

In Zimbabwe there are three categories of non-bank financial institutions: building

societies, asset management companies and money lending institutions. Moneylending
institutions include moneylenders that are primarily offering consumption lending
services and microfinance institutions (MFIs) that usually started as NGO (NGO-MFIs)
with enterprise lending products.

iii) Government Owned institutions,

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The Zimbabwean Government has set up various development finance institutions to
service micro, small and medium enterprises, examples include POSB and SEDCO.

iv) Semi formal institutions (SACCOs),

These include Credit Unions and Cooperatives, and they draw their membership from
the local community or from a similar employer. Examples are Masvingo Teachers
Association Savings and Credit Society, Women’s Savings and Credit Society.

Table 1.1: Distribution of Microfinance Institutions in Zimbabwe

City / Town Number

Harare 115
Bulawayo 26
Gweru 4
Mutare 7
Masvingo 10
Other 10
Total 172
Source: Reserve bank of Zimbabwe (Appendix No 1)

From the table above more than half (67%) of the registered MFIs are domiciled in
Harare, 15% are based in Bulawayo, with the remainder spread within smaller towns
and cities.

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Savings and Credit Cooperatives Societies (SACCOs)

Table1.2: Distribution of Registered SACCOs

Province Number
Harare 14
Bulawayo 6
Midlands 19
Mashonaland East 4
Mashonaland Central 1
Mashonaland West 5
Masvingo 6
Matabeleland 8
Manicaland 5
TOTAL 68
Source: Ministry of SMEs and Cooperative Development (Appendix No 2)

From the Table 1.2 above, there are a total of 68 SACCOs registered with NACSCUZ.
Of the registered SACCOs, 28% were affected by the economic turmoil that affected the
nation between 2006 up to 2009, hence are not currently operational. Midlands
province boost the largest number of registered SACCOs at 28%, followed by Harare at
21%.

1.3 Research Problem

The pioneers of Micro Finance in the 1970s, as alluded to earlier, Muhammad Yunus,
where of the view that MFIs should uplift the lives of people, especially woman, out of
poverty as well as spurring economic growth. However, the question is, are Micro
Finance Institutions really alleviating poverty or they are putting people into more
poverty?

Are the lives of poor people in developing nations, like Zimbabwe better off with the
services and conditions being offered by MFIs or Microfinance is actually putting

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hundreds of millions of people into deeper debt, poor people are being actually
encouraged to take out loans, miring them in a cycle of debt that they can never pay.
There is a scenario wherein poor people are over indebted, as a result they pay Peter
from what they borrow from Paul – who in most cases is a high priced local
moneylender. Hasheni (1997, p. 250) states that Professor Muhammad Yunus, founder
of the Grameen Bank,

“discovered that while the credit market through Microcredit Organisations was
the scene of the most brutal exploitation of the poor (with high interest rates
leading to persistent indebtedness leading to forced sale of assets and
destitution) it was also the arena where interventions were easiest for allowing
the poor to break out of their cycle of poverty (ibid).”

Appendix 1, is showing examples wherein the Deputy Sherriff is auctioning on public

different assets of microfinance clients. There are various cases some of which include:

i) Fidelity Life Financial Services vs Millicent Madzima and Another, Case No

HC8637/11
ii) SEDCO vs M KUVIMBA Case No SS141/11
iii) SEDCO vs T MUTEEKA Case No SS168/11

The highlighted cases are just examples, we have these appearing weekly in our print
media. It therefore entails that in 52 weeks, with an average of 10 such cases per week,
520 microfinance clients are losing their assets by way of public auction after failing to
services their debts, in other words these clients are left in a worse off position and are
poorer. In essence these are only the recorded cases, there are other unrecorded cases
wherein the poor people are saddled with various debts, adding weight to the notion that
microfinance institutions are actually adding more poverty on poor people, than
alleviating the same.

The Salary Services Bureau in Zimbabwe highlights that 70% of the country’s Civil
Servants, are having more than half their salaries deducted at source to pay various
MFIs and Money lending Institutions. Owing to the economic hardships the
Zimbabwean economy has endured, most if not all Civil Servants Salaries are below the

9
poverty datum line which is at $510 as per The Zimbabwe Consumer Price Index
(March, 2012) publication by the Consumer Council of Zimbabwe, hence they are being
sunk into more poverty when those meager salaries have to pay MFIs for loans
accessed. At the end of the day, it becomes a vicious circle, where civil servants who
are the country’s largest labor force remain in that debt trap.

1.4 Research Objectives

The research has four main objectives as defined below:

1. To establish the role being played by Micro Finance Institutions in poverty

alleviation in Zimbabwe.
2. To establish whether Micro finance Institutions Business conditions assist the
poor.
3. To carry out an assessment of the products and services offered by Micro
finance institutions and their contribution in poverty alleviation in Zimbabwe.
4. To establish whether there is any legal framework that governs and supervises
Microfinance Institutions as well as ascertaining its conditions.
5. To come up with recommendations regarding Micro Finance Institutions best
practices and how they can help alleviate poverty and spur economic
development.

1.4.1 Research Questions

1. What role is being played by Micro Finance Institutions in alleviating poverty in

Zimbabwe, and how?
2. What legal framework governs the operation of Micro Finance Institutions in
Zimbabwe?
3. How do Micro Finance Institutions business conditions assist the poor?
4. What products and services are being offered by microfinance institutions and
what are their contributions in poverty alleviation?

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1.5 Research Proposition

There is a general belief that Microfinance institutions in Zimbabwe are actually not
playing any role as far as poverty alleviation is concerned. In Zimbabwe MFIs through
their activities are adding more poverty on poor people, in other words they are making
the poor people poorer.

1.6 Justification for Research

The researcher aims that, based on the findings of the research, policy implications may
be derived that will find ways into policy formulation of future MFI policies in Zimbabwe.
The study also builds on lessons in other developing nations and how these can be
modeled into the Zimbabwean economy.

The research is also intended to:

i) The study will assist the Reserve Bank of Zimbabwe in policy formulations as
well as in its surveillance and monitoring exercises.
ii) The research will assist Micro Finance Institutions in their role of sustainable
economic development as well as poverty alleviation to the low income urban
and rural clients.
iii) The research will also add to the body of knowledge to the public, key industry
players in this case, donor community, micro finance institutions and ZAMFI.
iv) The research will also benefit those contemplating entering the MFI sector, on
how best the can model their institutions at the same time remaining in
operational and meeting the needs of their clientele.

1.7 Scope of Research

The research is centered on the role of Micro finance institutions in poverty alleviation in
developing nations. In as much as there is no internationally recognized definition of a
developing nation, for the purpose of this study, the researcher will take developing
nations as countries with low levels of material well being. In this case, countries like

11
Zambia, Zimbabwe, Uganda, Kenya, Malawi fall in that category, however, the
researcher will zero in on Zimbabwe.

i) Due to time and cost constraints the research will be conducted in Harare, that is,
focus will be on Micro Finance Institutions based in Harare.
ii) Respondents in the research will be registered Micro Finance Institutions and
Zimbabwe Association of Micro Finance Institutions members.

Respondents in the research will be various Microfinance institutions staff and

management, the public (micro finance clients), Management of key industry players
like ZAMFI, ZAMLA and RBZ.

1.8 Ethical Issues

Saunders et al (2003, p.147) say ethics refers to the appropriateness of an individual’s

behavior in relation to the rights of those who become the subject of his/her work, or are
affected by it. Wells (1994, p.284) define ethics in terms of a code of behavior
appropriate to academics and the conduct of research. The researcher therefore
ensured all the respondents that the data being provided will be used entirely for
academic purposes only. No names of respondents or institutions will be recorded or
noted for other purposes other than the research.

1.9 Limitations to the study

In as much as the research topic looks at the ‘Case of Zimbabwe’, the research was
done in Harare due to time and funding constraints. Other respondents do not
necessarily value the research and there is always that suspicion that the information
supplied may be used for other purposes to their detriment.

12
1.10 Dissertation Structure

The research will be split into five distinct sections viz;

Chapter One

The first chapter outlined the background to the study, the problem definition, aims and
objectives of the research, the significance and scope of the research.

Chapter two

This chapter outlines the theoretical background laying the foundation for the research.
It outlines the contributions of previous researchers and authors to the field under study.

Chapter three

The third chapter focuses on the research methodology, that is, the approach and
strategy employed by the researcher in gathering data, data analysis as well as
limitations encountered in the course of the research.

Chapter four

The chapter looks at the response rate, interpreting and analyzing implications as well
as making intellectual inferences. Overlay the chapter’s main thrust is discussing the
results and marching them to existing literature.

Chapter Five

The last chapter summarizes and draws conclusions as well as recommendations of the
study. The chapter also details the actions to be undertaken so as to solve or rather
improve the situation.

13
1.11 Chapter Summary

The chapter outlined the role of microfinance institutions in poverty alleviation as well as
spurring economic development. It also highlighted the research objectives as well as
the significance of this study as there are many beneficiaries to the findings,
conclusions and recommendations of the study.

14
 CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction
Project assessment criteria usually require you to demonstrate awareness of the current
state of knowledge in your subject, its limitations, and how the research fits in the wider
context (Gill and Johnson, 1997). In Jankowicz’s (2000, p. 159) words:

“Knowledge does not exist in a vacuum, and your work only has value in relation to
other people’s. Your work and your findings will be significant only to the extent that
they’re the same as, or different from, other people’s work and findings.”

Any research topic or subject matter should have theoretical underpinnings from which
it is derived, hence literature review discusses the various theories and also
acknowledges prior researches done by others. The researcher will review literature
under the following main areas.

1. Definition of terms, Microfinance, MFIs and Poverty.

2. Development and Expansion of the Microfinance Industry
3. Regulation of MFIs and the Microfinance Sector
4. Sustainability of MFIs.
5. Previous Microfinance Surveys in Zimbabwe.
6. MFIs and Poverty Alleviation in Developing Economies
7. Microfinance Impact Studies in Developing Economies
8. MFIs and Various Microfinance Programs
9. A critical assessment of Microfinance as a Poverty Alleviation Tool
10. Criticisms of Microfinance

15
2.2 What is Microfinance?

The Zimbabwe National Microfinance Policy (2005, p.5) defines microfinance “as the
provision of a range of financial services, including savings, small loans, insurance, and
money transfer services to marginalized members of the population and SMEs that do
not have access to finance from formal financial institutions.” According to United
Nations (2005) microfinance is the sustainable supply of small scale financial services
such as credit, savings accounts, and insurance to poor and low income people.

Onyuma and Shem (2005, p.199), assert that microfinance is the provision of savings,
credit and/or other financial and business products that are micro in size to poor clients,
who are conventionally believed to lack the capacity to save and the ability to pay the
high interest rates charged by commercial banks on credit. They also highlight that
most microfinance programs exclusively target the poor in the community, the majority
of who are women because of the belief that they are the most poverty prone members
of the community.

The Task Force on Supportive Policy and Regulatory Framework for Microfinance
constituted by NABARD as cited by Sen (2008, p.78) take microfinance as “the
provision of thrift, saving, credit, and financial services and products of very small
amount to the poor in rural, semi-urban, and urban areas for enabling them to raise their
income levels and improve their standard of living”. Robinson (2001), echoes the same
sentiments as well as further highlighting that microfinance entails small scale financial
services for both credits and deposits, that are provided to people who farm or fish or
herd; operate small or microenterprises where goods are produced, recycled, repaired,
or traded; provide services; work for wages or commissions; gain income from renting
out small amounts of land, vehicles, draft animals, or machinery and tools; and to other
individuals and local groups in developing countries, in both rural and urban areas.

Senanayake and Premaratne (2006, p.145), assert that, in time past microfinance was
easily understood, it entailed a credit methodology which employed effective collateral
substitutes to deliver and recover short term, working capital loans to micro and small

16
entrepreneurs. However, in today’s world the concept has become complex and far less
clear, it now applies for all poor and low income people, not just small entrepreneurs, it
is actually beyond just working capital loans, such as savings, credit, insurance, and
other money transfer services.

2.3 What are (MFIs) Microfinance Institutions?

Microfinance institutions (MFIs), in turn are the banks / organisations which provide the
financial services. The primary role of many thousand MFIs, or “banks for the poor”, that
currently operate worldwide is to support the strong but often untapped entrepreneurial
spirit that exist in poor corners around the world through building of an “inclusive
financial system” (UNCDF, 2006, as cited in Bystrom, 2007). Murray and Boros (2002,
p.10), in the same vein highlight that MFIs give access to financial and non financial
services to low income people, for starting or developing an income generation activity.

Of late many governments, businessmen and academicians have shown great interest
in microfinance for its potential role in poverty alleviation activities. The World Bank’s
World Development Report of 2000, highlight that, MFIs have been expected to reduce
poverty, which is considered as the most important development objective. According to
The State of the Microcredit Summit Campaign Report 2008, at the end of 2007, 3 164
MFIs reported reaching 92, 270, 289 clients, 66 614 871 of whom were among the
poorest (living on less than US$1/ day, or bottom half of those below national poverty
line) when they took their first loan. Data from 330 institutions, representing 87.7% of
the poorest clients, was verified by the Campaign.

With MFIs, if financial liquidity problems are seen as the central reason of poverty, the
organization will more or less confine its role to the provision of credit. Such MFIs will
evaluate their success in terms financial indicators of outreach and repayment.
However, if on the other hand, poverty is viewed as a result of a more complex process
involving liquidity problems as well as other factors, the MFIs’ objectives will tend to
incorporate the provision of a larger range of financial, economic, social and
organizational interventions. As Copestake (2006, p.420), argues, the immediate goal in

17
this case is not service provision in itself, but rather the provision of services that will
have a positive and observable impact on poverty.

Hulme and Moore (2006, p.2) say microfinance providers are most often Non
governmental organizations (NGOs). However, there are also a number of government
sponsored MFIs, as well as statutory banks involved in micro lending, and institutions
that act as intermediaries between banks and borrowers. Furthermore, different types
and amounts of non-financial inputs, from skills training and marketing, to organizational
support, health and education are also provided by many MFIs in accordance with their
particular goals (ibid).

2.4 What is poverty?

According to Lipton and Ravallion (1995, p.2553), “poverty exist when one or more
persons fall short of economic welfare deemed to constitute a reasonable minimum,
either in some obsolete sense or by standards of a specific society”. In broad terms
poverty can be defined as an absence of well-being or of capabilities that are generally
accepted as being desirable or valuable. Lack of wellbeing therefore implies severely
curtailed human capabilities (Sen, 1997).

It should however, be noted that, the human capability of doing and being are not
themselves measurable, even though attributes of their lack such as hunger, under
nutrition, physical weakness, illness, lack of shelter, being dressed in rags among
others are recognized as descriptions of the many facets of being poor.

Poverty research has further revealed much about the characteristics that are widely
shared by poor people and families with the most fundamental of these being lack of
assets. According to Moser (2006) looking at the assets of the poor is essential in
understanding upward mobility, that is, the transition out of poverty. In a rural context,
landlessness is seen as a highly accurate predictor of poverty as is low human capital
resulting from poor health and inadequate education provision (Haan and Zoomers,
2005). Otero et al (2004, p.13) observe that, “the families that operate micro-enterprises
typically lack assets, especially marketable assets”. The World Development Report

18
2000 further states that, for one to appreciate poverty in all its dimensions, it helps to
think in terms of people’s assets, the returns or rather the productivity of those assets
and the volatility of those returns (World Bank, 2000). Poverty is seen as a multi
dimensional phenomenon, with consumption based measures supplemented by other
welfare indicators such as ownership of household durables as well as access to
services including education and health care (Adjei, Arun and Hossain 2009, p.268).

The 1997 Microcredit Summit Declaration and Plan of Action defined the poor as those
living below the poverty line established by each country, and the poorest as those
people in the bottom 50% of that group. Schneider (1997) as cited by Onyuma and
Shem (2005, p.202) identifies the poorest of the poor as the hard-core poor who
represent about half of the poor and subsist on a per capita income that is less than half
of that of the poverty threshold.

2.5 Development and Expansion of the Microfinance Industry

Hulme and Moore (2006, p.1) highlight that the microfinance industry has its roots in
Bangladesh with the Grameen bank. The industry now has a global outreach, with
more that 92 million clients reported in developing countries (ibid). Rutherford et al
(1999) highlight that the logic underpinning much of the recent innovation in
microfinance originates from a set of beliefs about the financial services needs of the
poor. It is very difficult to find a Poverty Reduction Strategy that does not include
microfinance as an element of national development (Hulme and Moore, 2006, p.1).
What started as small experiments in Bangladesh has now spread to all corners of the
world to such an extent that the Bangladeshi Prime Minister Begum Khaleba Zia had
this to say in 2006:

“We have received a lot of things from the international community, but we have
given the model of microcredit to the world”

Dichter (2006, p.114) in trying to explain and summarize the phenomenal expansion of
the microfinance movement over a short period of three decades says:

19
 “The UN’s 2005 ‘Year of Microcredit’ marked the long journey of microcredit from
an obscure experiment in the mid-1970s to the status of a worldwide movement.
Microcredit has captivated not just the entire development aid industry, but
journalists, editorial writers, policy makers and much of the general public in both
the North and the South. Virtually every development project I see these days,
from maternal and child health, to women’s education, to soil conservation, to
social forestry, to old fashioned integrated rural development, has a ‘microcredit
component’, and everyone from camel herders in Mauritania to peasants in rural
China can speak the lingo.”(ibid)

According to the estimate of the Microfinance Summit Campaign (2008), highlights that
there are close to 3000 Micro finance institutions with a clientele base of approximately
100 million people in developing nations and their cash turnovers are estimated to be in
the $2.5 billion mark. (Chowdhury, 2009, p. 7) highlights that such success stories in
the microfinance movement has attracted established and renowned financial
institutions , such as Morgan Stanley, Deutsche Bank and Citigroup.

Roodman and Qureshi (2006, p. 4), are of the opinion that the success of the
microfinance industry or rather sector boils down to product innovation as well as an
enabling environment. Their assertions are derived from analyzing various literatures at
hand as well as interactions with leading market players. They therefore conclude that,
just like all credit, microfinance helps some people at the same time when pushed hard
by service providers and suppliers also hurts some people. They further highlight that
the traditional focus of microfinance more on credit at the expense of other products like
savings appears to have arisen for practical business reasons as opposed to credit
helping poor people more. It is therefore of paramount importance for microfinance
investors to understand MFIs business models and how they succeed on two fronts,
that is, as business as well as agents of development.

20
2.6 Regulation of Microfinance Institutions/ Sector

2.6.1 Rationale for Regulating the Microfinance Sector (Microfinance Policy,

2006)

The Zimbabwe Microfinance Policy (2006, p. 9) says developing economies are usually
trapped in vicious cycles of poverty, with limited economic participation of the majority of
the citizens and a greater proportion of SMEs to formal financial services. High levels of
unemployment in Zimbabwe have created a huge informal sector. As a result there is
potential for the microfinance sector to play a pivotal role in fostering economic growth
and development by increasing productivity and employment opportunities. The
realization of the benefits accruing from microfinance activities to poverty alleviation and
economic development therefore calls for proper regulatory systems and structures for
the sector to effectively foster economic development and financial stability.

• Financial stability – requires that all systematically important institutions be

adequately regulated and supervised. While only a small portion of the providers
of microfinance currently under the regulation of the RBZ may be of systemic
importance on a global basis, the microfinance industry’s impact on financial
stability and economic development is significant (ibid).
• Financial Conglomeration – many economies Zimbabwe included, have
witnessed an increase in financial conglomeration with banking institutions
establishing unit trusts, asset management companies, microfinance and
insurance subsidiaries. In addition, some big MFIs are planning to transform into
deposit-taking MFIs, and also offer money transmission services. The rapid
growth of the microfinance industry has an impact on the financial markets due to
its sheer size and close ties with the formal financial sector. Regulation of MFIs
therefore closes regulatory gaps and fosters orderly development of the sector
(ibid).
• Legitimacy and Confidence – regulation of MFIs will build confidence in the
eyes of customers and investors. Regulation provides a benchmark of
acceptable behavior, which increases certainty, transparency and levels the
21
 playing field. A well regulated MF sector will help in attracting capital in the
sector. Providers of capital view safety and soundness as very important
investment considerations (ibid).
• Consumer protection – this is a critical issue of consideration in the regulation
of MFIs, because their clients usually have very limited choice or bargaining
power. Some MFIs employ abusive and reckless lending practices to increase
the likelihood of loan repayment and/or overcome contract enforcement
problems, which exposes them to high reputation risk (ibid).

2.6.2 Reserve Bank of Zimbabwe Circular to Micro lending and Microfinance

Institutions

Dated: 17 June 2012 (Appendix 5).

The circular centered on Regulation of the said institutions in light of various complains
being received from members of the public regarding:

• Unethical, objectionable and unscrupulous business practices by some MFIs and

Money lending Institutions.
• Inadequate disclosure of business conditions, usurious lending rates going as far
as 50% per month.
• Abusive debt collection practices, including disposal of pledged collateral without
due legal processes.

In the same Circular, The RBZ urged all MFIs to seriously observe International best
practices and uphold the internationally agreed Core Client Protection Principles
(CCCP) for microfinance in conducting their business. MFIs are sternly warned to
comply with the various Laws and Regulations governing the conduct of their business
including directives and Instructions issued by the RBZ, failure upon which will result in
imposition of appropriate supervisory action, including cancellation of operating
licenses.

22
2.6.3 Section 3(3) of Banking Act [Chapter 24:20] in Zimbabwe

The Finance Minister through General Notice No. 101 of 2005 gazettes the invocation of
Section 3 (3) of the Banking Act, [Chapter 24:20] on 11 March 2005. The notice states
that certain provisions of the Banking Act now apply to MFIs, Building Societies, POSB,
Money lending Institutions and Asset Management Companies. This was meant to
address the supervisory gaps which existed in the Statutory Instrument governing the
mentioned Non Bank Financial Institutions. In principle, the invocation of Section 3(3)
has created a conducive environment for direct supervision by the RBZ.

2.7 Sustainability of (MFIs) Microfinance Institutions

Institutional sustainability of MFIs has lately become a priority, if they are in any way
going to fulfill their role of poverty alleviation and economic development. It is of
paramount importance that MFIs should be economically viable and sustainable in the
long run (Srinivasan et al, 2006). Various studies have found strong linkage between
the financial sustainability of MFIs and achievement of their social objectives. Low
income customers are more likely to borrow from institutions they see as financially
viable (Zeller et al, 2003).

As Arsyad (2005, p. 399) highlights, a lot of questions are being raised over the cost of
funds for these MFIs and their ability to earn margins sufficient to cover operational
costs and still leave some profit. Therefore to attain sustainability, MFIs should align
their operations in line with their objectives as well as cost of funds. Business models of
these institutions involve huge operational costs since a lot of contact is required with
the intended beneficiaries. Therefore in as much as their scale of operations goes up,
MFIs need funds beyond the grants or rather soft loans that they get in some instances.
This is why, Morduch (1999) as cited by Crabb (2008, p. 211), describes the need for
more empirical work on the sustainability of MFIs. He points out: “Empirical
understandings of microfinance will also be aided by studies that quantify the roles of
the various mechanisms in driving microfinance performance”. All this idea of cost and

23
sustainability is coming in response, to the growing donor ‘fatigue’ so to say, in
continually subsidizing developmental work.

Barr and Fafchamps (2006, p. 622), highlight that developed MFIs of South Asia and
Latin America are now facing the challenge of becoming more commercially viable,
emerging MFIs in Sub-Saharan Africa face other challenges to their very survival and
core methodology. In this backdrop the sustainability of MFIs is a critical point even from
a social performance standpoint. It is important to realize that the results achieved in
poverty alleviation by MFIs cannot be an event and given the endemic nature of
poverty, requires a continuous and long term commitment from these enterprises. This
is why, Rhyne (2005, p. 14) highlights as a reflection of the apparent shift from ‘charity’
to ‘commercialization’. That shift to commercialization draws with it some criticism as it
entails that MFIs are therefore diverting from the poverty alleviation motive into
profiteering motives.

MFIs are seen to be prioritizing repayment rates, creating good loan books, and
managing client numbers rather than social intermediation. Repayment performance is
a particularly key variable for the donors and international funding agencies on which
many MFIs, especially in Sub Saharan Africa still depend for their funding (Godquin,
2004, p.1909).

Disappointing performance characterizes MFIs in Southern Africa (Lafourcade, Isern,

Mwangi, and Brown, 2005, p.5). Basu, Blavy and Yulek (2004) as cited by Dixon,
Ritchie and Siwale (2006, p.48), highlight that various evaluations of microfinance
projects throughout Africa suggest that they have been less successful than they have
been in Asia and Latin America. These evaluations have however been centered on
impact assessment, program replication, client outreach and financial sustainability
(ibid). In Zambia, for instance, microfinance performance is problematic and MFIs are
particularly confronted with the problem of default, which threatens their own
sustainability and further provision of financial services to the poor (Likulunga and
Simonda, 2007, p 4).

24
2.8 Previous Microfinance Surveys in Zimbabwe

2.8.1 Zimbabwe National Survey on Microfinance December 2005 to March

2006 (Microfinance Policy, 2006)

A survey conducted by the National Task Force on Microfinance in Zimbabwe between

December 2005 and March 2006, revealed a number of critical issues on the sector
which are:

i) Weak Institutional Capacity- the prolonged sub-optimal performance of

existing Savings and Credit Cooperative Societies (SACCOs), microfinance
and development institutions was largely attributed to incompetent
management, weal internal controls and lack of bespoke deposit protection
scheme. Other factors identified include poor corporate governance, lack of
well defined operations and restrictive regulatory/ supervisory requirements.
(ibid)
ii) Weak Capital Base – The existing MFIs had weak capital bases which could
not adequately provide a cushion for the risk of lending to micro-
entrepreneurs without collateral.(ibid)
iii) Existence of a Huge Un-served Market – The size of the unserved by existing
financial institutions was large. The average banking density in Zimbabwe
was one financial institution outlet to 17 000 inhabitants. In the rural areas, it
was 1: 63 000, that is less than 3% of rural households had access to
financial services.(ibid)
iv) Employment Generation and Poverty Reduction- the survey noted that
improved access and an efficient provision of savings, credit and insurance
facilities enable the poor to be self sufficient by providing them with self
employment opportunities. The micro-enterprises accessing microfinance
also create employment opportunities for other people. This supports the
notion by Littlefield (2003) who highlights that the availability of financial
services is a critical factor in reducing poverty and its effects, resulting in

25
 positive impacts on nutrition, education, health, gender equity as well as the
environment.
v) Economic Growth and development- without permanent access to institutional
microfinance, most poor households rely on meager self finance or risky and
expensive informal sources of finance. This would limit their ability to actively
participate in and benefit from development opportunities. MFIs assist in the
formalization and integration of the informal sector into the formal sector
thereby facilitating economic growth and development.(ibid)
vi) The Interest of Local and International communities in Microfinance - Many
international investors have expressed interest in investing in the
microfinance sector. The establishment of a well defined microfinance
framework for Zimbabwe would provide an opportunity for them to finance the
economic activities of low income groups and the poor.(ibid)
vii) Weak regulatory framework – due to the diversity of institutions that provide
microfinance services, coupled with a fragmented regulatory framework;
regulation and supervision of the sector, has provided challenges for the
regulatory authorities.(ibid)

2.8.2 MICROFINANCE SECTOR RECOVERY STUDY IN ZIMBABWE

The Study was carried by Zimbabwe Association of Microfinance Institutions (ZAMFI)

and AYANI – Inclusive Financial Sector Consultants in May 2009. It is a two week
assessment of the needs for rebuilding the microfinance sector in Zimbabwe. As per
The Zimbabwe National Microfinance Policy (2006; p.7), Poverty reduction,
Improvement in the Standards of living and Social intermediation are some of the critical
roles of Microfinance, hence there was an urgent need to work on a Recovery Package
as well as Building an Inclusive Financial Sector.

The major findings of the study are:

Funding- The lack of funding is by far the biggest obstacle for all financial institutions,
including those in the lower income markets. There is therefore need for loan capital,

26
grants for operations and medium term finance. This supports notions by Dixon et al
(2006, p. 53), who highlights that CETZAM in Zambia acquired funding from DFID, and
as such is Zambia’s best known MFIs. In 1998, DFID provided $2.29 million in financial
support for a 5 year period from February 1998 (Copestake, 2002).

Removal of Regulatory Obstacles – this is a serious constraint especially the aspect

of renewing licenses every year. The study recommended that any MFI with a 2008
license should be allowed to operate without relicensing again.

Efficiency – The study highlights that Zimbabwe is somehow behind in terms of piloting
and introducing innovative new products and delivery channels. Microfinance service
providers need to revamp their business models to ensure efficiency. They should focus
on training new clients, chasing delinquent clients to avoid loan provisioning expense as
well as study other efficient microfinance service providers in Tanzania, Kenya and
Ethiopia which would help in determining how efficient gains would be made. The
findings agree with Musona (2004), who argues that Zambian MFIs are generally slow
in product innovation, loan processing and disbursement, which itself increases client
dissatisfaction thus encouraging clients to borrow elsewhere instead.

Staffing – there is need to ensure training of staff as well as recognizing performance

through bonus payments. For the successful running of operations staffing is a key
component which cannot be overlooked.

2.9 MFIs and Poverty Alleviation in Developing Economies

2.9.1 Sinapi Aba Trust (SAT) – Ghana

SAT established in 1994, is an MFI in Ghana which has a nationwide coverage and is a
partner in Opportunity International Network. The organization serves as ‘the bank for
the poor’ for over 50,000 poor clients, offering credit, savings, insurance, and training
services (SAT, 2007). SAT adopts a group based lending methodology called Trust
Banks, designed to reach the poorest of the self employed poor. Conditions and
procedures for extending credit to clients are more simplified and essentially include a

27
regular cash flow from the business for which the loan is being sought and attendance
of the SAT organized business orientation and training programs.

Purpose of research

The research was aimed at assessing the extend to which SAT has contributed to
poverty reduction among rural and urban poor by supporting them with small loans to
expand their businesses, generate income, and build up their asset base in the form of
financial, human and physical capital.

Findings

Financial capital has been identified as one of the effective tools to escape poverty. The
results reveal that participation in SAT’s microfinance programs is strongly associated
with increased expenditure by established clients for the acquisition of household
durables. The findings indicate that established clients reaped significant benefits
through participation in the program. Overall, the results showed appreciable
improvements in the accumulation of financial, human and physical assets. Established
clients managed to diversify their asset holdings which provided protection against risk
and vulnerability.

The findings are therefore agree with Hulme and Mosley (1996) and Murdoch (1999),
who argue that microfinance programs that have attained financial sustainability provide
the most impacts on participants’ standards of living. Snodgrass and Sebstad (2002) as
cited by Adjei, Arun and Hossain (2009, p. 266) note three main program effects which
can be measured as a result of providing the poor with access to microfinance services,
and these are economic (such as income and productive assets including savings,
insurance and household durables), well being (such as access to education, health,
food and clean water), social and political (this includes the ability to participate in
decision making, access to social networks and participation in collective actions to take
control over resources that affect their lives). These effects are generally assessed at
the individual, household, enterprise and community level.

28
2.9.2 Grameen Bank: Micro-Credit and Poverty Alleviation Program in
Bangladesh
Grameen Bank started as an action research project by Muhammad Yunus, a
Bangladeshi economist in Chittagong in 1976. The objective of the project was to test
whether the poor people are creditworthy and if credit can be supplied without any
collateral. Later with the help of Nationalized Commercial Banks (NCBs), Yunus was
able to provide a formal structure to help his experiment essentially serving as an
intermediary lender, by lending bank funds, collecting payments and depositing them
with the NCBs. With time Grameen Bank was established as a specialized bank with its
own charter to work exclusively with the poor, that is, individuals owning less than half
an acre of land. The idea came after support from The Finance Minister, though
commercial banks were against the idea (Yunus, 1999, p. 118-119).

Onyuma and Shem (2005, p. 202) highlight that The Grameen Bank is actually
considered as the most successful microlending model, which has been replicated
worldwide. It is one of the best known intermediaries that target the poor because in
Bangladesh one cannot own more than half an acre of farmland. Borrowers were
organized into small ‘peer monitoring’ groups of four or five people that met weekly to
make loan repayments (Hulme et al, 1996). Demand for credit grew rapidly and
repayment rates were good, so the project was able to secure loans for on-lending from
state controlled Bangladesh Bank and other commercial banks.

In 2001-2, all Grameen Bank branches began to operate the new, simpler and much
more flexible ‘Grameen Generalised System’, which offers four types of loan products:
basic, housing, higher education and struggling members (beggars) loans. There is also
a facility for larger small enterprise loans, and a range of companies (commercial and
not for profit) in the ‘Grameen family’. In March 2005, the Grameen Bank was working in
almost 51,000 villages. It claimed over 4.3 million members, over 95% women, and a
cumulative disbursement of over US$4.7 billion. (Grameen Bank at a Glance, March
2005).

Muhammad Yunus (2010) highlights:

29
 “In a traditional bank, the richer you are, the more important you are. With
Grameen Bank, the poorer you are, the more important you are. In fact, if you
have absolutely nothing, well you are our best customer. Banks spend a lot of
time looking at people’s credit history. Our bank is more interested in your
future.”

Rubinstern (1996) as cited by Onyuma and Shem (2005, p. 202), however, argues that
out of the long term Grameen Bank borrowers about 54% had moved close to the
poverty line but not crossed it as response to family needs had eaten into their loan.
Hulme and Mosley (1996) support this argument and further conclude that, Grameen’s
micro lending programs benefit mostly those just on the poverty line rather than those
well below it.

2.9.3 The CETZAM Case – Zambia

CETZAM Opportunity Microfinance Limited, was founded by the British Department for
International Development (DFID), and has been one of Zambia’s best known MFIs.
CETZAM was founded in 1995 and it has a strong vision to fulfill a social agenda driven
by Christian principles to transform the lives of the poor by providing opportunities to
create employment and generate income through credit and training services. Dixon et
al (2006, p. 419), highlight that the MFI takes a missionary perspective and utilizes the
Christian biblical framework to shape a threefold (economic, social and spiritual)
transformation development. Its first loans were disbursed in July 1998, and DFID
agreed to provide $2.29 million in financial support for a 5 year period from February
1998 (Copestake, 2002, p. 747).

CETZAM offers its clients two main types of loan products, solidarity group lending and
individual based loan product. Its group based lending methodology is intended to target
the poorest of the economically active population especially women (CETZAM
Brochure, 2001). Borrowers form groups which jointly share liability for loan delinquency
or default (Jurik, 2005). No family members can join since close relatives may not be
willing or able to impose social sanctions. The group members together guarantee one

30
another’s loans ranging from $80 to $200. Client’s businesses include, food vending,
retail in general, tailoring, chicken rearing, fruit and vegetable selling, fish and used
clothes selling amongst others. CETZAM officers train potential clients and groups in
basic book keeping skills for ten weeks before disbursing loans to them. The self
selection of group members is a critical element of the methodology along with joint
mutual guarantees (Matin, 2000, p. 149).

In addition group lending programs operate in a way whereby the work of screening,
monitoring, and enforcement of repayment are all to a large extend progressively
transferred from the MFI’s agent (loan officer) to the group members themselves
(Hermes, Lensink and Mehrteab, 2005, p. 153). Navajas et al (2003, p. 751) states the
advantages of such collective action in the actual screening of loan applications and
monitoring of borrowers. One resulting argument is that group members can obtain, at
low cost, an understanding of the reputation and indebtedness of the loan applicant to
underscore their efforts to ensure repayment (Bastelaer, 1999 as cited by Dixon et al
2006, p. 54) and thereby socially obligate rather than formally compel, due repayment.
Bhatt and Tang (2001, p. 1112) argue that the joint liability mechanism has been a
major methodological breakthrough for lending to the poor. Jain and Moore (2003, p.
109), however question whether the mechanism operates as intended as certain factors
not considered in the models, such as enforcement of loan officers, are also important
for the MFIs success.

2.10 Microfinance Impact Studies in Developing Economies

2.10.1 An assessment of Zambuko Trust, Zimbabwe (October, 2001)

Zambuko Trust

Zambuko began in 1992 and is a partner in the Opportunity International Network. Its
mission is “to be a bridge between the marginalized, the unemployed and opportunities
for enterprise and income generation” in Zimbabwe. It offers group co-guaranteed loans
and individual loans backed by guarantors to individuals who have a microenterprise
that is at least six months old, are not employed fulltime elsewhere, and have an

31
enterprise that is deemed to be financially viable. Zambuko also has a special loan
product targeted at the very poor. Zambuko’s microfinance program is therefore
centered on microcredit and is supplemented by business management training.

Findings

The findings were in three categories viz household level, enterprise level and individual
level.

i) Household level

The assessment found out that continuous participation in Zambuko had an impact on
client households acquiring assets. Continuous participation resulted in clients acquiring
durable assets like stoves, refrigerators which improved the quality of life of participating
households. Barnes et al (2001) as cited by Adjei, Arun and Hossain(2009, p. 283)
highlights that repeat clients have a significantly higher valued asset base of consumer
durables than new clients. It must be noted that the acquisition of household durables
not only indicate a higher standard of living, but also as a store of wealth that can be
rented out or sold in case of extreme financial crisis (Sherraden 1991; Barnes, 1996) as
cited by Adjei, Arun and Hossain (2009, p.283)

Results also show that the program has had positive impacts on the value of funeral
related assistance the participating households provide to other households, which is an
indicator of improved ability to make lump sum expenditures.

Results show that in 1999 the proportion of household’s boys aged between 6 and 16
attending school was higher for the continuing and departing clients than the non
clients. The same pattern was apparent when analyzing only those households that
were extremely poor in 1999. The results suggest that Zambuko’s program had an
impact on the education of boys aged 6 to 16 in client households. The findings are
therefore consistent with earlier studies in Africa which argue that participation in such
microfinance programs results in enhancement of human capital such as children’s
education and health status (Mosley and Rock,2004) as cited by Adjei, Arun and
Hossain (2009, p. 283).

32
Participation in Zambuko’s program also appeared to have had a positive impact on the
frequency nutritious foods were consumed in extremely poor households and the
diversification of income sources among departing clients. Better management of
financial resources is likely to explain the higher consumption levels among extremely
poor continuing clients, compared to non clients, in the frequency that meat, chicken or
fish, and milk were consumed in their households. The results on the diversification of
income sources among departing clients imply that loans enabled these households to
gain an additional income source. The findings support the claim that microfinance
programs promote investment in human capital such as schooling, and raise awareness
of nutrition as well as reproductive health issues among poor families (Khandker, 1998,
p. 12). In their study, Pitt and Khandker estimate that the marginal impact of
microfinance on consumption was 18% for women and 11% for men (Pitt and
Khandker, 1998, p. 958-96).

The results also suggest impacts that relate to selective allocation of financial
resources. The following aspects were not affected by participation in the microfinance
program: the value of assistance given to non-household members, education of
household’s girls aged 6 to 16, expenditures on housing improvements and acquisition
of a television, electric fan or means of transport.

ii) Enterprise level

An analysis of the survey shows that Zambuko had a positive impact on the inflation
adjusted value of monthly net revenue of the matched enterprise of repeat continuing
clients. In spite of the unfavorable economic environment, they earned an estimated
Z$1,380 a month more than the non clients in 1999. The findings support the
assertions by Aideyan (2009, p.295), who says, microfinance programs can increase
incomes, lead to significant growth in business profits, decrease vulnerability and lift
families out of poverty.

Participation in the microfinance program did not have an impact on employment in the
matched enterprise and in all household enterprises. The results are more of a
reflection of the unfavorable economic conditions for microenterprises in 1999.

33
Transaction relationships refer to ways micro entrepreneurs organize and manage their
businesses in reference to others. Results in this aspect, suggest the influence of
training by Zambuko.

iii) Individual level

Participation in Zambuko’s program appears to have had a positive impact on clients

having an individual savings account and on the number of ways extreme poor
continuing clients’ saved. This is therefore enhanced by Robinson (2001, p. 21) who
says:

“deposit services are more valuable than credit for poorer households. With
savings, not only can households build up assets to use as collateral, but they
can also better smooth seasonal consumption needs, finance major expenditures
such as school fees, self insurance against major shocks, and self finance
investments”.

The findings support the hypotheses that participation in a microfinance program can
lead to greater self esteem and self confidence, and enhances clients’ ability to plan for
the future. This is because of clients’ ability to manage their enterprise, meet the
financial demand of the household and acquire assets.

2.10.2 Development Impact Study: South Asia

An impact of Microfinance on economic development, particularly in terms of poverty

alleviation, in South Asia has been studied and produced different results. The Table
below details the various recent studies and results on the impact of microfinance in
South Asia including Sri Lanka.

Table 2.1: Microfinance Impact Studies South Asia

Study Coverage Methodology Major Findings

Amin et al (2003) Bangladesh (Grameen Nonparametric test of Members are poorer
Bank, BRAC, ASA) stochastic dominance of than nonmembers.
average monthly Programs are more
consumption of successful at reaching

34
 members and non poor, but less
members. successful at reaching
vulnerable poor. The
Maximum likelihood test vulnerable are
of microcredit effectively excluded
membership on from membership
vulnerability,
consumption and
household
characteristics

Chen and Snodgrass India (SEWA Bank) Control group from Average income
(2001) same geographic area. increase rises for bank
clients in comparison
with control group. Little
overall change in
incidence of poverty, but
substantial movement
above and below
poverty line.
Coleman (2004) Thailand (Village banks) Double difference No evidence of program
comparison between impact. Village bank
participant and non- membership has no
participant households impact on asset or
and between villages in income variables.
which programs are
present and villages
where programmes are
not yet present.
Hulme and Mosley Indonesia (BKK, KURK, Borrowers and Control Growth of incomes of
(1996) BRI), India (Regional samples, before and borrowers always
Rural Banks), after exceeds that of control
Bangladesh (Grameen, group. Absolute
BRAC, TRDEP), Sri increase in borrowers
Lanka (PTCCS) income larger for better-
off borrowers.
Source: Montgomery and Weiss, 2005

Using data from Bangladesh, Amin, Rai and Ropa in 2003 find that microfinance
programs have reached the poor. Nevertheless, according to their findings, the very
poor and vulnerable do not appear to be reached. Chen and Snodgrass in 2001 study
the operation of the Self Employed Women Association Bank (SEWA Bank) in India,
which provides low income households in the informal sector with microfinance
services, and find that average income increase rise for SEWA bank’s clients in
comparison with the control group. In Thailand, Coleman (1999) employing data on
villages that participated in village bank microfinance schemes and control villages that
were yet to introduce microfinance schemes, finds that the village bank membership
has no impact on poverty. One of the reasons for such a weak poverty impact is that

35
there was a tendency for wealthier households to self select into village banks. The
wealthier households control the village banks, that is, they become committee
members of village banks. Ackerley (2005, p.203) concurs with Coleman and says most
micro lending programs are actually not serving the poorest of the poor, but those a little
better off. Bauman (2002) also echoes the same sentiments when he highlights that
finding in South Africa shows that micro lending institutions have failed to deliver
poverty reduction mechanisms. These sentiments are also shared by Weber (2003).

In 2004, Coleman using the same data set concludes that the impact of microfinance
programs on committee members’ wealth is positive, but on ordinary members’
wellbeing is insignificant. Hulme and Mosley (1996) employing a control group
approach looking at the changes in income for households in villages with microfinance
programs and changes for similar households in non-program areas in selected South
Asian countries find that growth of incomes for borrowers always exceeds that of the
control group. Nevertheless, gains are larger for non-poor borrowers.

Therefore, in as much as microfinance programs are deemed to play a vital role in

poverty reduction among the poor, there is need to emphasize that knowledge about the
achievements of such initiatives is to a greater extent partial and in some instances
contested. Adams and von Pischke (1992); Montgomery et al (1996); Buckley (1997),
caution against much optimism on microfinance programs buy pointing to the negative
impact of the programs. For instance, Adams and von Pischke (1992, p 1468) argue
that “many of the loans being made to micro-enterprises will not be repaid, most of
these programs are likely to be transitory, and many of the targeted borrowers will not
be materially assisted in the long run through programs that increase their debt.” They
further argue that debt is not an effective tool for helping most poor people to enhance
their economic conditions, be they operators of small farms or micro-enterprises.

If ever microcredit is to have sustainable impact on poverty reduction in developing

nations, it calls for a holistic approach to the whole subject. Access to borrowing
facilities on its own might not have recognizable impact, just as Pollin (2007, p 2), rightly
puts it, “microenterprises run by poor people cannot be broadly successful simply
because they have increased opportunities to borrow money.”

36
Hulme and Mosley (1996, p 134), also conclude from their studies of various micro-
credit programs that “most contemporary schemes are less effective than they might
be”. They argue that microcredit is not a panacea for poverty reduction and that in some
cases the poorest people have been made worse off. Buckley (1997, p 1091) also
states that, ‘despite the growth over the last decade in micro-enterprise credit programs
throughout Africa, there appears to be little evidence to suggest significant and
sustained positive impacts on the supposed beneficiaries. The same findings of
marginal improvement on the borrowers of microfinance came out of a World Bank
sponsored study involving 1,800 households in Bangladesh. Commenting on the
findings, Roodman and Qureshi (2006, p 38) highlight that a $250 per year loan
increases a borrower’s annual income by $12.50. Taking an individual surviving on $2
per day, this is basically a 1.5 percentage increase which naturally does not live up to
the microfinance billing.

2.11 MFIs and Loan Delinquency Management

Hashemi (1997, p 250) states that Professor Muhammad Yunus, founder of the
Grameen Bank,

“discovered that while the credit market was the scene of the most brutal
exploitation of the poor (with high interest rates leading to persistent
indebtedness leading to forced sale of assets and destitution) it was also the
arena where interventions were easiest for allowing the poor to break out of their
cycle of poverty”

Dixon et al (2007, p 58) in their findings of an MFI based in Zambia, highlight that in
January 2003, the branch had 2 024 clients, by December 2003, the number had fallen
to 825 clients (others being ‘written off’), and loan officers were reduced from seven to
five. They went further to say, the MFI had problems in enforcing repayment, since it did
not have a clear legal framework to prosecute defaulters. Johnson et al (2003) concurs
in that most MFIs face difficulties in handling defaulters, because there are problems
with costs. In Bangladesh (Grameen Bank, BRAC) were there is group lending, loan

37
officers would not use police to recover loans, they asked influential locals to exert
pressure (Jain and Moore, 2003).

Aryeetey 1996 as cited by Bastelaer (2006, p 13) points to some harassment endured
by defaulters as MFIs try to recover their loaned funds as well as signaling publicly how
the consequences of becoming a defaulter can be made to be socially embarrassing,
especially in a society where credit and debt are considered intensely private issues.
Other studies have also reported defaulters losing household items such as wall clocks,
hand sewing machines, fridges, sofas amongst others and humiliated by police call outs
(MKNelly and Kevane, 2002). The RBZ in their Circular to Micro Lending Institutions
and MFIs dated 17 June 2012, highlights of the abusive debt collection practices by
MFIs, including disposal of pledged collateral without due legal process.

2.12 MFIs and Microfinance Programs

2.12.1 Insurance Role of Microfinance Programs

In as much as microfinance programs are not insurance programs per se, the poverty
and to some extent economic insecurity vicious circle amongst the poor, generally
implies that they can play the insurance role too. In fact, to a greater extent the
insurance role outweighs its income generation role. Islam (2009, p. 8) highlights that
there are two main channels through which the insurance role of microfinance works viz
the timing effect and the income effect. The timing effect, comes in mainly because a
loan is provided in cash, recipient can easily divert it towards consumption if times are
bad. The income effect, as households are able to withstand shocks on the basis of
increases in income levels.

Morduch (1999, p. 1606) asserts that microfinance borrowings generally improves the
ability to smooth consumption across seasons, and entry into the program is partly
driven by insurance concerns. Morduch goes on to say that his own investigation
vindicates the consumption smoothing effect of microfinance programs and concludes
that “Substantively, the results suggest that benefits from risk reduction may be as
important or rather more important than direct impacts on average levels of

38
consumption”. Dercon (2005) concurs with Morduch regarding the insurance role of
microfinance, suggesting that while the income effect still has to be documented
conclusively, there is no doubt about its insurance role working via the timing effect.
Clarke and Dercon (2008, p. 11) echo the same sentiments with other researches and
highlight of the strong evidence that access to microfinance facilities leads to reduced
vulnerability, in the sense of a lower threat of fluctuations in the incomes or
consumption. They therefore conclude that, microfinance may then offer a means for
reducing risk exposure, while keeping costs and incentives aligned. Rutherford (1999)
as cited by Adjei et al (2009, p.275) aslo notes the importance of insurance when he
says, poor people need financial products in the form of loans, savings and insurance
schemes to smooth out their household cash flow, deal with emergencies and other
unforeseen requirements of cash and augment income through investment in a gainful
way.

There are however, limitations to the insurance role of microfinance. As Clarke and
Dercon (2008) note, microfinance programs are not primarily geared to be insurance
programs, so that their role is only an unintended consequence, so to say. Microfinance
programs do not also represent an efficient way to pool risk, because though it allows
an individual to spread the effect of a shock over time, the individual still bears the brunt
of it. The shock is not actually shared by other members of the group, in the case of
group lending, so that microfinance provides only a crude method of risk pooling.
Microfinance can actually aggravate insecurity by requiring the loan repayments be
made even when negative shocks hit the borrower (ibid).

2.12.2 Micro Savings Programs and potentiality of the poor

It is generally accepted that one of the primary motives of savings is to a greater extent
‘precautionary’; hence they can act as a method of ‘self insurance’. In actual fact,
Hulme, Moore and Barrientos (2008) do regret the switch of attention from savings to
microfinance (credit) in recent years. They actually think micro savings is “the
neglected element of micro financial services”. According to these authors, in response
to the vast unmet demand for formal micro finance services from the poor, it is mainly

39
micro credit (debt) that is getting the attention, and micro insurance is the “new kid on
the block” so to speak. Micro savings by contrast, remains neglected and there is much
less concerted effort to experiment and innovate with micro savings services and
regulation than micro credit and micro insurance. The authors further think that national
governments and NGOs have contributed to this neglect by highlighting Micro credit
(debt) in their PRSPs, when in actual fact a more complete range of micro financial
services, including, credit, savings and insurance are needed. Hulme, Moore and
Barrientos view this omission as a serious error, given the capacity of micro savings as
an insurance mechanism for all sorts of shocks and vulnerability on the poor, and also
as a means of creating lump sums for investment.

In as much as the aspect of micro savings have been neglected or rather have not been
given the publicity compared to micro credit (debt), Morduch (1999, p. 1607) note two
institutions that have been offering micro savings. Bank Rakayat Indonesia (BRI) by
1996 was offering saving services to over sixteen million households. Though the
deposits were small as they mainly targeted at the poor households, the total volume of
savings amounted to over $3 billion, giving BRI a cheap source of funds for re-lending.
There is also Bangladesh’s MFI named “Safe Save”, whose staff solicits savings from
members on a daily basis, helping poor households convert their ability to save in
regular but small amounts into a useful lump sum of money.

2.12.3 Micro insurance programs to the poor and economic insecurity

Islam (2009, p. 12) assert that, some earlier attempts to provide insurance services to
the poor have generally faced various problems, including difficulties in administration,
high transaction costs, and the usual problems of moral hazard and adverse selection.
Mosley (2008) concurs to the challenges faced in micro insurance and further
articulates that despite those problems, a repressed demand from the poor for
insurance is clearly felt. It is therefore not surprising that the organizational innovation
that allowed microfinance to reach the poor proved attractive as a delivery mechanism
for insurance services too. As a result many micro insurance programs have emerged.
Churchill (2006) actually presents a large compendium of 74 micro insurance programs

40
around the world in different dimensions. The straightest forward are in terms of risk
covered, that is, risk related to life, health, funeral- burial, and weather, amongst others.

2.12.4 Impact of Micro insurance

Quantifying the impact of micro insurance programs is challenging, as is the case for
other types of microfinance programs. In an attempt to evaluate the impact of micro
insurance programs, Mosley (2008) tabulates findings from case studies of the following
five programs:

i) FINCA- Foundation for International Community Assistance (Uganda)

ii) BRAC – Bangladesh Rural Advancement Committee
iii) Grameen Kalyan
iv) SSS – Society for Social Services (Bangladesh)
v) BASIX India – Bharatiya Samruddi Finance Limited (India)

From the case studies, the first four are health schemes, while the fifth is a weather
scheme. Mosley from the case studies finds the positive impact of micro insurance
programs. Isla (2009, p. 13) concurs on the impact of micro insurance programs on the
poor households, and further emphasize on its positive external factors.

Despite its positive impact however, the extent of micro insurance still remains very
limited, particularly when compared with that of micro credit. Clarke and Dercon (2008,
p. 10) say insurance is inherently a more complicated service than credit, and hence
uptake is low. The low uptake levels therefore implies increased cost of insurance,
insured risk pools are kept smaller, thus making reinsurance costlier. Mosley (2008)
also concurs and emphasizes the inverse relationship between break even premium
and portfolio size. This trade off suggest that there are basically two routes to overcome
the problems MFIs face with micro insurance programs. One is to raise the premium,
which is obviously self defeating as it limits access to the poor. The other is to increase
participation by the poor by keeping the premiums low and reach the uptake level at
which the program becomes financially viable. It is therefore imperative to understand
that if MFIs take up micro insurance and combine it with complementary policies and

41
design the right features, it can be an additional instrument against poverty and
insecurity that engulfs the poor mostly in developing economies.

2.13 A Critical Assessment of Microfinance as a Poverty Alleviation Tool

Mohammad Yunus, the godfather of microfinance, alludes to the fact that on average
5% of Grameen Bank’s clients in Bangladesh exit poverty each year (The Economist,
2009, July 16). It is however, interesting to note that despite these assertions, various
scholars are skeptical on its impact and role in reducing poverty. This therefore explains
the continuous debate amongst various different scholars about the impact of
microfinance and MFIs on poverty reduction.

2.13.1 Impact on poverty reduction

Hulme and Mosley (1996), in their studies on the impacts of microfinance concluded
that most beneficiaries of microfinance are not the targeted poor as such, but the non
poor borrowers with incomes above the poverty datum line. In other words microfinance
according to Hulme and Mosley (1996), has positive impacts on the non poor
borrowers. In a case where they employed a control group which did not get loans from
MFIs against poor borrowers who accessed loans, they noted that the majority of those
with incomes below the poverty datum line ended up with less incremental income after
accessing microloans. Their findings therefore entail that credit is only one factor
amongst many in the generating of sustainable income and output. Banerjee et al
(2009), also echo the same sentiments in their MIT study, and further assert that there
are other complementary factors, which can be crucial to make credit more productive,
more importantly, the recipient’s entrepreneurial skills. This is actually true in most
developing nations, for instance Zimbabwe, most people lack the technical expertise of
managing low level businesses. Such assertions are supported by Karnani (2007, p.
37), who highlights that the majority of people fall short when it comes to the
entrepreneurial skills, creativity and vision of managing small businesses. This is not
unique to developing nations, with developed nations, in as much as there is high

42
literacy levels and access to financial services, a significant percentage of the labour
force are employees as opposed to entrepreneurs.

Mahajan (2005, p. 7), in as much as he agrees on the importance of MFIs and their
impact on poverty reduction, he calls for a holistic approach to the whole idea, he
highlights that:

“Microfinance is a necessary but not a sufficient condition for micro-enterprise

promotion. Other inputs are required, such as identification of livelihood
opportunities, selection and motivation of the micro-entrepreneurs, business and
technical training, establishment of market linkages for inputs and outputs,
common infrastructure and sometimes regulatory approvals. In the absence of
these, micro-credit by itself, works only for a limited familiar set of activities such
as, small farming, livestock rearing and petty trading, and even those where
market linkages are in place”.(ibid)

It is therefore critical that, though through MFIs, there are increased opportunities to
access financial services such as credit, for the microenterprises to be successful they
also need access to proper infrastructure in the form of roads and cheaper modes of
transport for transporting their produce to the market. In actual fact the microenterprises
need marketing support to reach customers.

It is therefore important and critical to realize that microfinance, though a significant

component or rather solution to poverty, it cannot alone effectively do the job. This is
supported by Harris (2007, p. 1), who highlights “there is actually no one single solution
to global poverty, microfinance is not the solution to global poverty, but neither is
healthy, education or economic growth.” In actual fact the solution must encompass
other important facets and with microfinance if properly run and focused on the targeted
beneficiaries , becomes a powerful tool. This is actually supported by Professor Yunus
(2003, p. 171) who says:

“Microcredit is not a miracle cure that can eliminate poverty in one fell
swoop. But it can end poverty for many and reduce its severity for others.
Combined with other innovative programs that unleash people’s potential,

43
 micro-credit is an essential tool in our search for a poverty free world”
(ibid).

2.13.2 Supply Side and Demand Side Factors

As alluded to earlier, for microfinance to impact positively on poverty alleviation, there is

need for a holistic approach to the whole idea. The challenge noted by many scholars
has been addressing the supply side aspect, through MFIs and neglecting the demand
side. Pollin (2007, p. 2) notes that, “microenterprises are in need of a vibrant, well
functioning domestic market itself that encompasses enough people with enough
money to buy what these enterprises have to sell.” Microenterprises can actually be
beneficiaries of expanding economies with decent paying jobs. These paying jobs will
therefore enhance and boost the domestic market, thus balancing demand and supply
side, which will eventually make microfinance more productive both as a poverty
alleviation and economic development tool. Bateman and Chang (2009, p 7), point out
that microfinance actually ignores the crucial role of scale economies, instead it
produces an oversupply of inefficient microenterprises which undermines the
development of more efficient SMEs. In situations where economies are shrinking or
rather are not expanding microenterprises resort to cost cutting strategies, which have a
bearing on the market share local SMEs. Such SMEs would otherwise have reduced
unit costs and boasted production in the long term.

It is therefore imperative to address the demand side of an economy if ever

microfinance, as a constant inflow of MFI financed entrants will eventually result in
market saturation and intense competition. Such intense competition will obviously
impact on returns on the part of microenterprises, as these can even be below the cost
of borrowing. The situation become more complex when MFIs charge high interest rates
(Huq, 2004), in essence the whole point of MFIs playing a role in eradicating poverty
and spurring economic development is defeated. Therefore without a vibrant domestic
market micro financed business usually suffer, and in most cases can even become
worse off than their original position.

44
2.13.3 Returns to Investment and Interest rates

If there is any issue that is a bone of contention against MFIs is the issue of interest
rates, the issue actually draws much criticisms from all angles. Various authors and
scholars have come out with different views, some advocating for the high interest rates
and obviously some critiquing the rates. Morduch (2008), reports a survey of 350
leading MFIs charging between 20 percent and 40 percent per year after taking inflation
into account. Such high interest rates are defended on the basis of sustainability on the
part of the MFIs. Advocates for high interest rates argue that anything less will crowd
out profit seeking investors and bankers from the microfinance market. Such argument
however, contradict claims that the sector is more cost effective compared to ordinary
commercial banking loans, taking cognizance of lower information gathering and
processing costs.

There is also the argument of subsidies in the microfinance sector, Jain and Moore
(2003, p. 10), assert that interest rates are on the lower end mainly due to implicit
subsidies. They highlight that, all microfinance programs they looked at obtained
subsidized funds for initial capitalization as well as for meeting part of the operating
costs. Jain and Moore (2003, p.10) highlight that “not more than 5 percent of micro-
credit programs worldwide could become financially viable without subsidies.” The same
argument is supported by Chowdhury (2009, p.5) who says, “despite growing interest
from private investors, 53% of the $11.7 billion that was committed to the microfinance
industry in 2008 came at below market rates from aid agencies, multilateral banks and
other donors”. This therefore supports the argument of low interest rates in the
microfinance sector.

Morduch (2008, p.1) an advocate of microfinance, defends high interest rates on the
basis of returns to capital investment, he is of the view that returns to capital are high in
micro enterprises. He further asserts that, poor households have high economic returns
to capital. Morduch (2008) from his research reports significant returns to capital
exceeding 20 percent for small, male owned retail outlets. It is however interesting to
note that, returns to capital for some financially constrained businesses are on the high

45
side, going as high as 70 to 80 percentage points. Morduch (2008) therefore concludes
that an interest rate of 10 percent per month is reasonable. A critical analysis of the
researches unveils a number of limitations, the major one being that the research
centers on male run small enterprises at the expense of female owned business. This
therefore does not correlate to the popular belief amongst the pioneers of the
microfinance movement that it is better for female borrowers as opposed to their male
counterparts (Yunus, 2003). The other critical limitation of the research findings is, they
overlook how an individual computes the cost of own labour. Taking a typical case of a
nation like Bangladesh where there is surplus labour, an individual can compute a nil
shadow price of own labour, meaning that any surplus over the cost of capital can be
considered as returns to capital or rather profits. In simple terms this can be the
explanation of the high returns to capital on the part of microenterprises.

2.13.4 Contributions of Microfinance Institutions on poverty reduction

Dichter (2006), though a vocal critic of microfinance appreciates that the industry can be
of assistance to poor households smooth consumption in periods of unexpected
economic meltdown and crisis. This positive and critical role of microfinance should not
be dismissed altogether. The industry actually has far reaching impacts on poverty and
productivity, considering that parents will be afforded the opportunity of sending their
children to school, affording nutritional intakes of their families as well as other basic
needs like medication. Such observations are supported by Dasgupta (2005, p.247)
who says “at low levels of nutrition and health care, increase in current consumption
improves future labour productivity. Pitt and Rozenweig (1985), “observe from
Indonesia data that an increase in the consumption of fish, fruit, or vegetables by 10
percent reduces the chances of illness by 9, 3 and 6 percent respectively.” The
challenge with developing economies like ours is that the majority of the poor borrow for
consumption, school fees, medication and not for production, implying that the nutrition
index will only improve upon accessing the loan, after which with scheduled repayments
it goes down, hence the creation of a vicious circle of some sort. Nicholas (2009),
confers that microfinance actually has no impact on poverty, the poor borrowers instead

46
are able to pay for things they can’t afford, like a home television set, radio, or even a
cart for their business.

Microfinance, therefore through successful MFIs, gives the unemployed and the poor
some opportunities, hope and self –esteem. Roodman and Qureshi (2006, p. 39) ,
argue that “commercially successful MFIs are indeed remarkable organisations,
employing hundreds or even thousands of people of people at tasks once thought to be
impossible.” Good jobs created by MFIs should actually have some considerable
multiplier effects. Any form of employment whether self or by an employer has got some
psychological effect on an individual’s dignity as well as sense of respect in the
community. Another important consideration is that microcredit allows people to
ascertain their creditworthiness. The fact that banks are willing to offer them larger
facilities, implies an increase in economic activity, which subsequently eradicates
poverty in the long run. MFIs, on their own have also managed to create employment.

2.14 Criticism of microfinance

The fact that microfinance programs are expanding both in their coverage and in the
range of services offered can be seen as enough evidence of their success especially in
developing nations like Bangladesh, India and Sri Lanka. However, Armendariz and
Morduch (2005) say the sector has also been dogged by many criticisms, some of
which include financial viability, ability to reach the extreme poor, propensity to charge
high interest rates, limited macroeconomic impact and difficulty in scaling up of
operations.

Islam (2009), however, points that not all the criticisms faced by MFIs and the
microfinance sector can be made simultaneously, because many of them contradict
each other. For example, it is difficult to complain about microfinance’s inability to reach
the extreme poor while at the same time insisting that it remains financially solvent.
Similarly, it is not very reasonable to demand that microfinance remains financially
viable and yet complain about high interest rates.

These differing opinions on microfinance have created two broad classes amongst
scholars and researchers. On one hand are those taking a more narrow financial

47
efficiency point of view. They emphasize the necessity for being financially solvent and
hence recommend such steps as charging break even interest rates and scaling up
their operations. On the other side are those emphasizing microfinance’s proven
capacity to reach those who would otherwise remain outside the orbit of formal financial
services, especially women, and microfinance’s various non financial positive benefits.
Armendariz and Morduch (2005), argue that microfinance should not charge high
interest rates or any other charges, thereby neglecting the poor in order to become
financially viable. They say it is actually worthwhile providing subsidies to the sector
until it reaches financial viability. Clarke and Dercon (2008) agrees with those assertions
and argue that microfinance programs, because of their goal to service the poor, should
never be expected to be financially viable, and should therefore always receive subsidy,
in particular to help them experiment and innovate.

2.15 Chapter Summary

This chapter reviewed literature on regarding the role of microfinance in developing
economies. The chapter started at defining three key terms, that is, microfinance,
microfinance institutions and poverty. There was then focus on the sustainability of
microfinance institutions in developing countries as well as the origins and development
of the microfinance sector. The chapter also looked at previous studies in the
microfinance sector in Zimbabwe as well as Case Studies done in other nations on the
same sector. It then narrows down to a critical analysis of the role and effectiveness of
microfinance in poverty alleviation.

48
 CHAPTER THREE

3.0 Research Methodology

3.1 Introduction

This chapter outlines the general research process and the conceptual framework
underpinning the research topic under study. That entails focusing on the methodology
used to collect data from various sources and the techniques utilised. The chapter will
also look at the sampling techniques to be applied and the justification thereof. The
following sections will be looked at in the chapter:

i) Research design,
ii) Research philosophy,
iii) Research strategies,
iv) Target population,
v) Sampling design, sampling size,
vi) Sampling procedure, and sources of data.

3.2 Research Design

Collins and Hussey (2003), define research as a systematic and methodical rigorous
process of enquiry and investigation into a particular problem or issue to increase
knowledge. Fraenkel and Wallen (1996) define the research design as an outline of how
the research is going to be carried out.

3.3 Research Philosophy

According to Saunders et al (2003, p.101), the research philosophy “depends on the

way an individual thinks about the development of knowledge, which then affects the
way one goes about doing the research.” There are three categories of research
philosophy viz; positivism, interpretivism and realism.

49
3.3.1 Positivism

Gill and Johnson (1997), as cited by Saunders et al (2003, p.101) assert that if the
philosophy reflects the principles of positivism, there will be an emphasis on a highly
structured methodology to facilitate replication and on quantifiable observations that
lend themselves to statistical analysis. Positivism is an epistemological position that
uses the methods of natural sciences to study social reality and beyond (Bryman and
Bell, 2003). With positivism principles, one will be working with an observable social
reality and the end product of such research can be law like generalizations similar to
those produced by the physical and natural scientist (Remenyi et al, 1998, p.32).

Posivitism philosophy, therefore involves quantitative research, wherein data is

collected, analysed and interpreted using mathematical or statistical methods.

According to Bryman and Bell (2003), the positivism philosophy is differentiated from
other research paradigms in the following aspects:

i) Objectivity – there is the aspect of scientific research being conducted in a value

free way.
ii) Deductivism – the purpose of the theory is to generate hypotheses that can be
tested and will allow explanations of the laws to be assessed.
iii) Phenomenalism – in that only knowledge confirmed by senses can genuinely be
warranted as knowledge.
iv) Inductivism – knowledge is accumulated through gathering facts that provide the
basis of the law.

3.3.2 Interpretivism

The interpretivism philosophy generally highlights that situations are complex and are
therefore a function of a particular set of circumstances and individuals. Remenyi et al
(1998, p.35), argues that, it is important to understand, the details of the situation to
understand the reality or perhaps a reality working behind them. The philosophy

50
advocates for the notion that knowledge is a function of experience and is also
concerned with understanding human behavior from a participant’s own frame of
reference. Collins and Hussey (2003), also assert that the philosophy centers on the
subjective state of the researcher as well as the meaning of social phenomena rather
than measurement.

Therefore, the interpretivism philosophy is a qualitative method which seeks to

understand attitudes, feelings and behaviours of individuals.

3.3.3 Realism

Saunders et al (2003, p.102), say realism is based on the belief that a reality exist that
is independent of human thoughts and beliefs. The realism principle is therefore a
mixture of positivism and interpretivism, that is, qualitative and quantitative methods.

Bryman and Bell (2003), highlights that there are two forms of realism viz:

i) Empirical realism – this form of realism states that reality is understood through
application of appropriate methodology.
ii) Critical realism – critical realism articulates that conceptualization by science is a
way of knowing and ascertaining reality.

In this research it was therefore imperative for the researcher to use, the interpretivism
philosophy taking cognizance of the fact that most of the data was qualitative.

3.4 Research Strategy

The research strategy is a general plan of how the researcher intends to answer the
research questions that have been set. Saunders et al (2003, p.108), highlight that the
research strategy should contain clear objectives, derived from the research questions,
it should also specify the sources from which an individual researcher intends to collect
data as well as the constraints that will be faced.

51
There are different strategies, some of which include, experiment, case study, survey,
action research, grounded theory and ethnography amongst others. However, for the
purpose of this research and the objectives to be attained the survey strategy has been
adopted.

3.4.1 Survey

The survey is a popular and common strategy in business and management research.
The method allows the collection of a large amount of data from a sizeable population in
a highly economical way. Survey research is defined as a systematic gathering of
primary data through the use of a structured questionnaire and communication in a
reasonably large number and highly representative sample of respondents (O’Leary,
2005, p.76).

In addition to the questionnaire, there are other data collection methods that belong to
the survey strategy. These methods include structured observation and interviews.

For the purposes of this research, under the survey strategy, structured questionnaires
and interviews were employed by the researcher for MFIs, SACCOs and Microfinance
clients based in Harare. In as much as the research focuses on the role of microfinance
institutions in poverty alleviation in developing nations, the case of Zimbabwe, the
research was focused in Harare owing to reasons articulated to earlier on.

3.4.1 Why the Survey Strategy?

Saunders et al (2003, p.110) highlight the following as advantages and disadvantages

of using the survey strategy.

The survey method has the following advantages:

i) The survey method is perceived as authoritative in general, because it is easy to

understand.

52
 ii) As alluded to earlier, the survey method allows the collection of a large amount of
data from a sizeable population in a highly economical way.
iii) The method also allows the researcher to have control over the research
process.

The method however, has the following disadvantages:

i) The method is rather time consuming as it involves designing and piloting the
questionnaires.
ii) The method also curtails progress as there is much dependence on other people
for information.
iii) Data collected by the survey strategy may not be as wide ranging as those
collected by other research strategies; this is because there is a limit to the
number of questions that any questionnaire can contain.

In as much as the survey method has its pros and cons, it was adopted as it was the
best strategy that would allow the meeting of the research objectives and questions set
up in Chapter 1. As some way of managing some of the disadvantages of the strategy
some structured interviews were also conducted to management of MFIs, SACCOs and
key industry participants like ZAMFI and RBZ.

3.5 Population and Sampling Techniques

3.5.1 Population

The full set of cases from which a sample is taken is called the population (Saunders et
al, 2003, p.169). Wegner (2000) also defines population as the collection of all the
observations of a random variable under study and about which one is trying to draw
conclusions in practice. The population does not necessarily have to be people, it can
be items, gadgets, institutions amongst others depending on the nature of research
being undertaken.

For the purpose of this study the population of MFIs, SACCOs and Microfinance clients
is as follows:

53
 • 172 Microfinance Institutions in Zimbabwe(As per Appendix 1),
• 68 Savings and Cooperative Societies (As per Appendix 2)
• Approximately 1.5 to 2 million Micro finance clients in the country.

However, as alluded to earlier, owing to budgetary and time constraints, the research
focused in Harare, hence the Harare institutions and clients are to be taken as
representing the entire population from which the sample will be drawn.

The target population for the purpose of this research is therefore:

• 115 Microfinance Institutions based in Harare.

• 14 Savings and Cooperative Societies based in Harare
• Approximately 1.3 million Microfinance clients based in Harare.

3.5.2 Sampling Techniques

3.5.2.1 Sampling Design

According to Wegner (2000) a sample is a subset of the population from which

observations are made or measurements taken. Saunders et al (2003, p.170) concur
also in that a sample is a subset of the population with advantages over a census in that
cost, time and resources are less. They also highlight that sampling techniques provide
a range of methods that enable you to reduce the amount of data you need to collect by
considering only data from a subgroup rather than all possible elements. A sample
design therefore details how a sample is derived from the target population.

Sampling is important and provides an alternative to the entire population when, it is

practically impossible to survey the entire population and as alluded to earlier, budget
and time constraints prevent the researcher from surveying the entire population.

3.5.2.2 Sample Size

Saunders et al (2003, p.173) highlight that the choice of sample size is governed by:

54
 i) The confidence a researcher need to have in the data – that is, the level of
certainty that the characteristics of the data collected will represent the
characteristics of the total population.
ii) The margin of error the researcher is willing to tolerate – the accuracy one
requires for any estimates made from the sample.
iii) The types of analyses to be undertaken- in particular the number of categories
into which the data has to be subdivided.
iv) The size of the population from which the sample is being drawn.

For this particular research, a random sample of 50 MFIs, 10 SACCOS and 100 MFI
and SACCO clients was drawn. Since the samples are to be used to draw inferences on
the whole population, that is, MFIs, SACCOs and MFI clients in Zimbabwe, a large
sample was chosen to facilitate meaningful research.

3.5.2.3 Sampling Procedure

This is the way in elements of a sample are chosen from a given population. There are
basically two types of sampling techniques viz:

i) Probability / representative sampling

ii) Non-probability / judgmental sampling

3.5.2.4 Probability Sampling

Probability sampling is a sampling technique whereby the chance or rather probability of
each case being chosen from a given population is known and the same for all cases.
What this entails, is that it is possible to respond to various research questions as well
as achieving some set objectives statistically from a chosen sample. The sample will be
representative of the whole population.

There are four main methods of probability sampling namely cluster sampling,
systematic sampling, simple random sampling and stratified sampling.

Simple Random Sampling

55
Saunders et al (2003, p.179), say simple random sampling involves purely selecting at
random sample items from a list of the population. Various tools like computer or
random number tables can be used for the selection and each member of the
population has an equal chance of being selected.

Cluster sampling

Henry (1990) as cited by Saunders et al (2003, p.185) says cluster sampling and
stratified sampling are almost similar in that both involve dividing the population into
discrete groups prior to sampling. The groups are termed clusters and can be based on
any naturally occurring grouping. In this the sampling frame is the complete list of
clusters rather than a complete list of individual cases within the population. Simple
random sampling is then employed in selecting few clusters from wherein information is
collected.

Stratified random sampling

With stratified random sampling, the population is divided into strata based on
categorically stated attributes. This technique is to a greater extent a modification of
random sampling. A random sample is then drawn from each stratum.

Systematic sampling

This involves selecting one unit from the population at random and then selecting
additional units at regular intervals from the sampling frame. In principle it involves
numbering all units of the population and then selecting the 5th or 10th unit, which will
form the sample.

3.5.2.5 Non Probability Sampling

There are three main types of non probability sampling procedures viz quota sampling,
judgmental sampling and convenience sampling.

56
Quota sampling

This is a non-probability method which is equivalent to stratified sampling under

probability sampling. As in stratified sampling, the researcher identifies the strata and
their proportions as they are represented in the population. Convenience or judgmental
sampling is used to select the required number of units from each stratum.

Judgment sampling

With judgment sampling, the researcher selects the sample based purely on judgement.
There is however need to emphasize the fact that the researcher must be confident that
the chosen sample is truly representative of the entire population.

Convenience sampling

This method is mainly applied in exploratory research, wherein the researcher is

interested in getting an inexpensive approximation of the truth. The sample is chosen
because they are convenient.

For the purpose of this research, simple random sampling was utilised, as alluded to
earlier a sample of 50 MFIs, 10 SACCOs, and 100 MFI clients was selected.

3.5.2.6 Justification of Sampling Method

The researcher chose simple random sampling for the following reasons:

i) Simple random sampling is quite objective in that it gave all the units of the target
population an equal chance of being chosen or selected.
ii) Since the method utilizes random numbers or the computer, simple random
sampling allows the researcher to select the sample without bias.

3.6 Data Collection Methods

57
There are two main sources of data and these include, secondary and primary data. In
this research though much bias was on primary data, secondary data sources were also
utilised in order to satisfy the research objectives as well as demystify the whole
subject.

3.6.1 Primary Data

Wegner (2000) defines primary data as that which is captured at the point were it is
generated. This is data that is captured for the first time and for a specific purpose.
There are five major tools for collecting primary data and these include questionnaires,
focus groups, interviews, observation and experiments.

For the purposes of this research, questionnaires and interviews were employed as the
primary data collection methods. Questionnaires and interviews were chosen as these
are in a position to address the research objectives and questions detailed in Chapter 1.
The research being undertaken is more of explanatory, hence, the researcher will utilize
attitude and opinion questionnaires, as well as questionnaires of organizational
practices, which will help in identifying and unearthing different opinions. The
researcher is also confident that the questions are more or less standardized such that
they will be interpreted in the same way by all respondents (Robson, 2002, p.59).

Interviews were chosen as they allow the researcher an opportunity for further
clarifications and probing, hence they are relevant to addressing the problem at hand.
Interviews to some extend, allow the researcher to have some control of the research
process. However, in as much as they are time consuming (Wegner, 2000),
questionnaires and interviews were chosen as they are in a position to address the
research objectives.

3.6.2 Secondary Data

Secondary data include both raw data and published summaries, which had already
been collected for some other purposes. Francis (1995, p.128) defines secondary data

58
as data that is being used for some purpose other than for which they were originally
collected. Most organisations collect and store data to support their operations, such
types of data include journals, publications, sales reports, payroll details, various
statistics amongst others.

Secondary data is advantageous in that, it saves on time and cost of collecting and
gathering new data, however its main disadvantage is that there is no control over the
information and how it was collected.

3.7 Research Procedure

This section will in detail cover the whole research process that was employed in
gathering data.

3.7.1 Data Collection

As alluded to earlier, the researcher used two instruments under primary data, for data
collection, these are questionnaires and interviews.

3.7.1.1 Questionnaires

De Vaus (2002) as cited by Saunders et al (2003, p.298) define questionnaires as adata

collection techniques wherein the responded is asked to respond or rather answer set
questions in a predetermined order. In general with this research instrument the person
answering actually record their answers or responses.

Questionnaires have the following advantages:

i) They permit respondents time to consider their responses without interference

from, for example, the interviewer.
ii) It is possible to provide questionnaires to large numbers of people
simultaneously, hence it is to a greater extent cost effective.

59
 iii) Each respondent receives the identical set of questions, hence analyses of
results is to a greater extend simple.
iv) Questionnaires can also address a large number of issues and questions of
concern in some efficient way.

Disadvantages of questionnaires are as follows:

i) They are an unsuitable instrument for data collection, if probing is required. In

other words there is no real possibility of following up on answers.
ii) It is difficult to get a good response rate (Wegner, 2000), in most cases there is
no strong motivation for respondents to respond.

Questionnaires were used because of being less expensive and fast. Another critical
consideration for the choice of questionnaires was the need to obtain highly structured
responses that could easily be analyzed and generalized. The questionnaire approach
can easily address the research questions as well as the research objectives within the
limited financial resources and timescale available.

3.7.1.2 Questionnaire Design

Foddy (1994, p.17) emphasizes that, “the question must be understood by the
respondent in the way intended by the researcher and the answer given by the
respondent must be understood by the researcher in the way intended by the
respondent”. Saunders et al (2003, p.309), assert that, “the validity and reliability of the
data you collect and the response rate you achieve depend to a large extend, on the
design of your questions, the structure of your questionnaire, and the rigour of your pilot
testing.” A valid question will enable accurate data to be collected, and one that is
reliable will mean that these data are collected consistently.

In this research, two sets of questionnaires were employed, for the MFIs and MFIs
clients, these were divided into different sections and had both open and closed ended
questions. Open ended questions in as much as they are difficult to analyze were

60
included as a way of somehow probing for explanations from clients, which would be of
importance in deriving conclusions as well as recommendations.

The questionnaire had the following general sections:

i) Background information
ii) Demographic section
iii) MFIs conditions of business, services and products
iv) Impact of MFIs on clients well being
v) Clients general comment

NB: The sections however depended on whom the respondent is, whether MFI or MFI
client. Since in Chapter One SACCOs, were classified under MFIs, they received the
same questionnaire as all other MFIs. Samples of the questionnaires and covering letter
are attached at the back of this report as Appendix 3, 4 and 5.

3.7.1.3 Questionnaire Pretesting

Bell’s (1999, p.128) says “however pressed for time you are, do your best to give the
questionnaire a trial run”, as without a trial run, you have no way of knowing your
questionnaire will succeed. Pretesting will therefore assist in getting comments and
feedback on the representativeness and suitability of the questionnaire questions. There
is need to ascertain whether the data collected will fully address the research
objectives.

Therefore after designing the questionnaire it was send to 5 MFIs and 5 MFIs clients for
pre testing. The objective was to get feedback on the questionnaire design, time taken
to complete the questionnaire, relevance of the questions to the research topic,
sensitivity of the information as well as general criticism of the questionnaire. Some of
the responses from clients were quite positive; hence necessary corrections were noted
and effected accordingly.

61
3.7.1.4 Questionnaire Administration

The questionnaire can be administered through various means some of which include
personal, postal and email. The researcher chose personal and email, since they are
quicker. Delays in responding were followed through email as well as telephone calls.

3.8 Interviews

Kahn and Cannell (1957) as cited by Saunders et al (2003, p.263) defines an interview
as a purposeful discussion between two or more people. Interviews can help in
gathering valid and reliable data which is relevant to the objectives of the research.
Interviews make it easy to compare answers, and they come in different forms which
can be face to face, voice to voice and can also be conducted with individuals or a
group of individuals. The whole process of interviews can however be time consuming,
expensive and also violates the confidentiality aspect.

Face to face interviews were targeted at management of key industry players like
ZAMFI, RBZ, ZIMLA amongst other players, these were mainly aimed at soliciting their
views, experiences and recommendations for the subject under study. Management in
some MFIs was also considered as that gave the researcher an opportunity to probe for
additional information as well as seeking clarification where necessary.

3.10 Research Limitations

The research had a number of limitations to it mainly as a result to the prevailing

economic environment and the sensitivity of the Microfinance industry in general. One
major limiting factor faced is that institutions and clients chosen as the respondents may
not divulge correct and accurate information thus impacting negatively on the quality of
the data. The situation has been made worse with by the circulars (Public notices)
released by the RBZ on the conduct of some MFIs as well as the closure of McDowell’s
International Private Limited, as a result of such bad conduct (Appendix No 6). A
number of institutions were not willing to divulge information on their operations as they

62
suspected that they are under investigation from the RBZ. The researcher had to
convince through the covering letter from Graduate School of Management (UZ) and
guarantees that the research is purely academic.

3.11 Chapter Summary

The Chapter looked at the theoretical underpinnings of research methods and then
proceeded to look at the research methods, philosophies, types of research, population,
sampling procedures and methods of data collection that were used. Data sources as
well as validity and reliability of the questionnaires and interviews were also covered.

63
 CHAPTER FOUR

4.0 Results and Discussion

4.1 Introduction

This chapter centers on the results and discussion on the research undertaken. As
articulated in previous chapters (Chapter one and three), the research looked at both
MFIs and MFI clients. The findings shall therefore be discussed, interpretations will be
derived during the discussion and of course literature will be backing those
interpretations. The findings are presented in many different formats including pie
charts, bar graphs, and tables.

4.2 Response Rate

A total of 60 questionnaires were distributed to MFIs and 100 to MFIs clients

accordingly. The table below summarizes the responses the researcher managed to
get from the two sets of respondents.

Table No 4.1: Table showing response rates

Respondents Number of Responses Response rate

Questionnaires Received
Distributed
Microfinance 60 41 68%
Institutions
Microfinance 100 63 63%
Institutions Clients

As indicated in the table above response rate is at 68% and 63% which is above the
acceptable 60% (Edwards et al, 2002). The response rate is therefore acceptable and it
provides reliable and valid data for analysis. Of the 63 microfinance clients that
responded to the distributed questionnaires, 20 were microenterprises, that is, those
small registered companies employing between one to ten people, the remainder were

64
individuals who borrow from the various MFIs for personal use as well as for funding
their personal
sonal income generating projects.

4.3 DEMOGRAPHICS INFORMATION/SECTION

INFORMATION/

4.3.1 Gender and Microenterprises Distribution

32%

Male
Female
54% Micro Ent

14%

Figure 4.1: Distribution of responses encompassing Gender and Microenterprises

The Pie Chart above is showing gender distribution on tthe

he MFI clients that responded to
the distributed questionnaires. However,
However micro enterprises,, that is, small firms
employing between one and 10 workers (Shaw, 2004, p.1248), are also included since
they are also included amongst the 63 responses received out
ou of the 100
questionnaires distributed. From the pie chart, 14% of the responders were female, 32%
microenterprises and 54%
4% male.
male The findings show that most of the respondents are
men,
n, meaning that very few women are taking part or rather are beneficiaries
beneficiar of
microfinance
e programs in Zimbabwe. Such findings do not support various literatures
which advocate that microfinance is a proven strategy for reaching poor women
(Cheston and Kuhn, 2009, p.2).
p 2). In actual fact, The Microcredit Summit Campaign 2005,
reports
eports that 14.2 million of the world’s poorest women now have access to financial

65
services, thus accounting for nearly 74% of the 19.3 million poorest served by
microfinance.

In as much as the findings do not mean that there is gender discrimination in Zimbabwe,
it simply evidences that fewer women are accessing microfinance services. The World
Bank report on gender development 2001, highlights that societies that discriminate on
the basis of gender have greater poverty, slower economic growth, weaker governance,
go
and a lower standard of living (World Bank, 2001). Women are poorer and more
disadvantaged than men, yet studies in Latin America show that men contribute 50
50% to
68% of their salaries to the collective household fund, whereas women tend to keep
nothing
othing back for themselves,
themselves, they contribute to the well being of their families (Chant,
1997, p 39). Cheston and Kuhn (2009, p
p.2),
2), highlight that giving cash to women in the
form of working capital increases self esteem, control and empowerment by helping
them achieve greater economic independence and security, which in turn gives them
the chance to contribute financially to their households and communities.

4.3.2 Age of the respondents

> 55 years

46-55 years
Years

36-45 years

25 - 35 years

< 25 years

0 5 10 15 20

Number of Respondents

Figure 4.2: Age of respondents

66
Figure 4.2 above shows the age distribution
distribution of the respondents, as alluded to earlier of
the 63 MFIs clients that responded to the distributed questionnaires 43 were individuals
and 20 microenterprises. The age distribution in this case is therefore in relation to
individuals. A greater percentage
percentage of the respondents (40%) are in the economically
active age group, that is, between 25 to 35 years. The 46 – 55 years age group has
19%, whereas 36 to 45 years age group has 16%. The two least represented age
groups are those below 25years of age at 14% and above 55years, those that are
retiring at 12%. The researcher can simply say that most participants in the research fell
between 25 and 55 years, and these constituted 74% of the respondents. In as much as
the internationally recognized economically
economically active age group starts from 18 years to
around 60 years, but a critical analysis in developing shows that most young people
starts contributing positively to economic growth and the welfare of their households
around 25 years, when they become stable.

4.3.1.3 Qualifications / Levels of education

18
16
14
No of respondents

12
10
8
6
4
2
0
Primary Secondary Advanced Certificate Diploma Degree &
level plus
Educational Qualification

Figure 4.3: Educational qualification of respondents

The information gathered from the individual respondents shows that 7% have primary
education, 40% secondary education, 26% advanced level, 16% possess som
some

67
certificates in various courses offered by technical colleges, 9 % have diplomas and
only 2% have acquired tertiary education hence have degrees.

From the figures above the majority of the clients have secondary and advanced level
qualifications. Upon further
urther probing, these failed to get jobs and as a result had to find
some income generating projects to earn a living. The findings concur with Graham
(2006), who highlights that small businesses act as a vital tool for employment creation
to people with no
o or little education. These self employed people however, acknowledge
the need for basic business management training (Mahajan, 2005, p.7) if their projects
and small business are to flourish. Karnani (2007) however, says the microenterprises’
willingness to pay for training services is low.

Those that managed to get jobs, are earning salaries way below the poverty datum line
which is currently at $510 as per March 2012 Consumer Council of Zimbabwe report.
Hence, they are always borrowed with MFIs in an effort
effort to sustain a living.

4.3.1.4 MFIs Years in operation

14

12
No of respondents

10

0
0-2
2 years 2-5 years 5-10 years > 10 years
Years in operation

Figure 4.4:: MFIs number of years in operation

68
Figure 4.4 above shows that of the 41 MFIs that responded to the questionnaires, (32%)
for less than 2 years, 27% for 2 to 5 years, 17% have been operational for 5 to 10
years, and the remainder 25% for more than 10 years. The results simply indicate tthat
the majority of the MFIs under survey (59%) have been in operation for less than 5
years and are thus not that experienced in the sector. The re
results
sults also entail that most
of the MFIs have been registered, during the multi currency regime, after the period of
economic downturn of 2007 and 2008. In as much as most of the MFIs under survey
are inexperienced in the sector, the result can be relied on
on as they are a true reflection
of the current attitudes, motives and perceptions of people as they enter the sector.

4.4 BUSINESS INFORMATION/SECTION

INFORMATION/

4.4.1 Purpose of Loans and Advances

11% 13%
Working capital

16% Order financing

14%
Consumption
Asset financing
8% Start Up Capital
Medical

38%

Figure 4.3: Figure showing purpose of loans accessed from MFIs

Figure 4.3 above shows that for loans accessed from MFIs, 13% were for working
capital, 14% order financing, 38% consumption, 8% asset financing, 16% start up
capital and 11% medical expenses. The greater percentage went for consumption at
38%, in actual
ual fact it can be argued that 49% is for consumption as the 11% for medical

69
can also be accounted under consumption since it is generally not going to generate
any revenue compared to working capital or order financing.

As depicted above most of the loans advanced by MFIs are for consumption and a
substantial stake towards working capital and order financing on the part of
microenterprises. Zimbabwe is faced with low disposable incomes and the majority of
the working class is earning salaries well below the poverty datum line, for instance the
civil service which is the majority employer in most if not all countries, their takings
averaging between $300 to $450 are way to low below the datum line at $510. The
findings support assertions by Khandker (1998, p.12) who says microfinance programs
promote investment in human capital such as schooling, and raise awareness of
nutrition as well as reproductive health issues among poor families. In their study, Pitt
and Khandker estimate that the marginal impact of microfinance on consumption was
18% for women and 11% for men (Pitt and Khandker, 1998, p.958-96). However, in as
much as the poor households are being assisted in consumption smoothing through
access to funds from MFIs, there is always the danger of it being a vicious circle
wherein they end up being continuously under a debt trap in an effort to earn a decent
life. Such assertions can be supported by the greater percentage (35%) that has
accessed more than four facilities from MFIs (Figure 4.5), meaning that they are
continuously in debt for the better part of their lives.

From the findings, a closer analysis shows that a significant percentage (40%) of the
respondents accessed funds for business use. This includes, 16% start up capital, 13%
working capital and 11% order financing. These were both individuals and
microenterprises that are engaged in self projects for survival. The results supports the
findings by Cowling and Harding (2005) as cited by Hill, Leitch and Harrison (2006,
p.159) who say the formation and growth of businesses is directly related to their ability
to access an uninterrupted supply of critical resources, particularly finance. The findings
also support assertions by Adams and Von Pischke (1992, p.1466) who highlight that
microcredit programs have a great positive impact on employment creation. Therefore,
from the findings, MFIs in Zimbabwe are to some extent relevant as far as providing
funds for income generating projects is concerned, just as Aideyan (2009, p.295) says

70
microfinance programs
ograms can increase incomes, lead to significant growth in business
profits, decrease vulnerability and lift families out of poverty. However, the impact of
their activities and business conditions on the poor are subject to debate, as noted by
Mayoux (2005),
5), who highlights that, most MFIs programs, have positive economic
impact on clients in terms of income growth and reduced vulnerability, although the
effects are often small and all clients do not benefit equally.

The findings also show that 5 of the 63 clients under survey, accessed funds from MFIs
for acquiring assets and household durables, supporting findings by Khandker (2005,
p.266),
266), that there is strong evidence of microfinance programs helping the poor through
consumption smoothing and asset building,
building, he further asserts that microfinance actually
helps women acquire assets of their own. It is therefore,
herefore, critical to note that MFIs have
the various products and services that alleviate poverty, the only challenging aspect in
that objective is the cost of the various products and services.

4.4.2 Monthly Interest Rates and other Administration charges

20
No of respondents

15

10

0
0-10% 10-15% 15-20% 20-25% >25%
Interest rate ranges

Figure 4.4:: Graph showing monthly interest rates spread by MFIs

From the graphical presentation above summarizing the monthly interest rates offered
by the various MFIs that responded to the questionnaire, the majority 44% charge

71
interest between 20 to 25% per month. Twenty two percent of the institutions were
charging interest above 25% per month, with the remainder 34% charging below 20%
per month. A closer analysis of the findings shows that the majority of MFIs under
survey charge between 240 to 300% per annum which is way too high and somehow
very much unsustainable. Such findings concur with Christen et al (1995) as cited by
Onyuma and Shem (2005, p 202) who report of microfinance programs that charge
interest rates that are significantly high, way above the inflation rate. The Foundation
for Development Corporation (FDC) (2003) says micro lenders in Philippines charge up
to 36% in interest.

The findings are also supported by the RBZ in their Circular to Micro lending and MFIs
(Appendix 5), wherein they highlight of MFIs that are charging interest rates of up to
50% per month, translated to 600% per annum. The findings also support findings by
Huq (2004), who says, the idea of MFIs playing a role in eradicating poverty is defeated
as they charge high interest rates. The findings on interest rates also concur with those
of Morduch (2008), who reports interest rates of between 20 and 40 percent in a survey
of 350 leading MFIs.

The situation of high interest rates is further compounded by the fact that there are other
administration charges, not included in the interest rates.

Table 4.2: Table summarizing results on Admin and Penalty charges

Yes No
Admin Charges (Establishment fees, Drawdown fees) 37 4
Penalty Interest rates 41 0

From the findings summarized above 90% of the MFIs under survey indicated that they
charge administration fees on top of the interest charges that are met by clients. These
administration fees according to the institutions can be in the form of facility
establishment fees, drawdown levy. One institution upon further probing highlighted
that as part of its business conditions there is a 4% flat establishment fee (that is 4% of
the loan amount). Another manager of an institution advised of a 2.5% drawdown fee on

72
loan amount. A critical analysis of the findings will therefore show that the total cost of
borrowing is actually more if the administration charges are taken into account.

Research findings also show that all institutions charge penalty interest rate over and
above the normal interest rate on overdrawn clients. The penalty interest rates varied
from 5% to 15%, which in principle show that overdrawn clients are further punished for
failing to meet their repayments.

A critical analysis is to consider a microenterprise that is accessing a $4,000 credit

facility from an MFI and is being charged 20% interest per month, 4 % establishment
fees and a penalty rate of 5 percentage points above the normal interest rate. In
principle, the microenterprise has to pay $160 in establishment fees, $800 in interest in
the first month. It therefore implies that the microenterprise will need to generate more
than $1,000 to attain a profit in the first month which is to some extent not sustainable.
The situation will be worse off if the microenterprise fails to meet its monthly repayments
as they will be charged a penalty on the arrears position.

4.4.3 MFIs Business conditions and Client Satisfaction levels

Figure 4.4 below shows that 51% of clients are not satisfied with the business
conditions offered by MFIs, 24% are indifferent, in other words they have no option but
to accept the conditions. The remainders, that is, 11% are satisfied and 14% very happy
with the business conditions/ services offered.

Upon further probing, the majority of those that are not happy or rather not satisfied with
the business conditions mentioned the high interest rates and other charges like
establishment fees, drawdown fees as well as penalty rates on any missed repayments.
Commenting on interest rates, Armendariz and Morduch (2005), argue that MFIs should
not charge high interest rates or any other charges, thereby neglecting the poor in order
to become financially viable. The issue of high interest rates agrees with Murdoch
(2008) whose findings in a survey of 350 MFIs show rates between 20 and 40 percent
per annum after factoring in inflation. One client actually lamented the interest rates
which he termed ‘daylight robbery’. A greater percentage highlighted that the rates are

73
actually not sustainable, but they do not have an option. It is actually difficult to invests
those funds in business and generate enough to survive at the same time making loan
repayments.
ments. Another client actually highlighted they are actually working for the MFI,
there is no value addition on their well being.

14%
11%
51%
Very satisfied
24% Satisfied
Indifferent
Not satisfied

Figure 4.4: MFI clients’ satisfaction levels to business conditions offered

In as much as a greater percentage are not sat

satisfied
isfied by the business condition, there is
25% (14% very satisfied and 11% satisfied) who are happy with the business
conditions. These appreciated the flexibility in terms of security requirements, most of
them highlighted they have always faced challenge
challengess in accessing funds from
commercial banks, but with MFIs they are getting funds even without tangible security
like Title deeds. In actual fact all MFIs studied showed that they are flexible as far as
security is concerned, one’s salary as well as movable property like fridges, motor
vehicles, stoves, sofas amongst others can be considered as security. Such assertions
on security or rather collateral support the business model by Muhammad Yunus when
he pioneered the micro credit industry in the late 70s by lending to the poor without
collateral.

74
Other clients expressed satisfaction on the tenor of facilities which are flexible and they
vary depending on purpose of funds.

4.4.4 MFIs Service delivery – Turn Around time

>30 days

20-30 days
Days

10-20 days

5-10 days

<5 days

0 2 4 6 8 10 12 14 16 18

Number of respondents

Figure 4.5:: Turnaround time

The graph
raph above (Figure 4.5
4.5)) summarizes the turnaround time taken by institutions in
processing facilities. From the findings, 15% of the MFIs take less than 5 working days
to process a facility, 32% take between 5 and 10 working days, 44% take between 10
and 20
0 working days, whereas 10% take 20 to 30 days to process and disburse a
facility application. From the finding, one can conclude that the majority of MFIs take
more than two to three weeks to process and disburse a facility which is not very
impressive, especially
specially on the part of those in business (the microenterprises) and those
faced with emergences. Upon further clarification, the majority of MFIs highlighted the
issue of liquidity constraints currently being experienced in the economy at large, it
actually
ally takes time to harness the cash resources. One interviewed manager
highlighted that in time past, during the Zimbabwean Dollar era, it was quicker to
process facilities, but the multi currency regime is faced with liquidity challenges, hence
such poor turnaround times.

75
The findings, concur with Musona (2004) who found out that Zambian MFIs are
generally slow in loan processing and disbursement, which itself increased client
dissatisfaction and encouraged clients to borrow elsewhere instead.

Some clients mostly the microenterprises lamented the issue of delays, as some end up
losing out on business opportunities. This includes those that are sourcing funds for
working capital and order financing, in actual fact some have had their orders cancelled
after failure to meet the prescribed time of delivery.

4.4.4.1 Training and Advisory Services

17%

Yes
No

83%

Figure 4.6: MFIs that offer training services to their clients

The analysis above shows a summary of MFIs that offer training facilities to their clients
and those that do not. Findings indicate that 34 (83%) of the MFIs under survey do not
offer any training to their clients and the remainder do offer some training and advisory
services. Those that train highlighted that they train their clients on the following short
term courses or rather conduct workshops on basic book keeping, records
management, small business management. This supports findings by Dixon et al (2007,
p.54), who in their research at CETZAM in Zambia, highlight that loan officers train their
clients for 10 weeks before disbursing loans to them. In principle, as noted by ACCION

76
International in their 2003 Annual report, highlight that access to funding is not enough,
it needs to be accompanied with capacity building programs in the form of skills
development and technical training for it to have a positive impact on borrowers.
Aryeetey (1994), highlights that at SAT in Ghana potential clients normally receive
training at the branch prior to formal application for a loan.

For MFI programs to be more productive and helpful to the intended beneficiaries there
is need for basic education and training to understand and manage low level business
activity. The findings in this case enhance assertions by Karnani (2007, p.37) who says,
most people do not have the skills, vision, creativity and persistence to be
entrepreneurial. Mahajan (2005, p.7) also emphasizes on business and technical
training as being critical conditions for microenterprise promotion. In this instance,
microfinance may not add a positive impact given that 83% of the institutions surveyed
do not offer any training to their clients. The findings also concur with observations by
Ackerley (2005, p. 203), who says most micro lending programs are known to cut back
on support services for the poorest clients, such as business management, skills
training and education, and information provision as a way of covering costs. In this
context, therefore, these programs are actually not serving the poorest of the poor, but
those a little better off.

4.5 Loan Delinquency and Management

4.5.1 Default rate

Table 4.3: Clients Average Default Rates from 2009 to 2011

Year Average Default rate
2009 29%
2010 32%
2011 41%

The table above shows that there has been a steady increase in MFIs loans defaults
over the past three years from 29% in 2009 up to 41% in 2011. Upon further probing,
institutions highlighted that there was actually a discovery that most MFIs clients are

77
over borrowed with more than one institution, hence they face challenges in servicing
their dues. Other reasons highlighted include business failure, retrenchments from
employment as a result of the poor economic environment.

A manager of an MFI interviewed highlighted that, owing to the difficult economic

environment the country has and is still going through, most people are borrowed with
many institutions, hence they are failing to service those borrowings and will always
remain in that debt trap for a long time. The interviewee actually gave an example
wherein a civil servant gets a Salary based loan from a commercial bank (usually 4
times their net salary), another loan from an MFI which is deducted at source through
the Salary Services Bureau as well as a facility from a retail outlet (Edgars for example).
The situation is actually made worse considering that MFIs are charging high interest
rates, the research found out that the majority are charging rates above 20% per month.
Such an individual is obviously earning a salary below the poverty datum line of $510,
hence the individual will find himself/ herself in a debt trap that he/ she will take time to
come out. Another manager with another MFI actually highlighted that in some
instances they are being forced to write off some loans as ‘bad debts’ and loan officers
are concentrating more on recovering overdue payments. This supports Jain and
Moore’s (2003, p.117) view that organisations so focused upon collecting overdue
payments are already facing serious problems.

In another interview with one of the staff at ZAMFI on the issue of MFI defaulters, the
issue of being over borrowed also came out, to such an extend that defaulters in one
institution go on to borrow in another institution, hence necessitating the need of a
Credit Clearing Bureau. The staff member went further to say that most MFIs face
challenges with defaulters as a result of the lengthy and in some instances unclear legal
framework when it comes to prosecuting defaulters. This supports the assertions by
Johnson (2003) who says MFIs face difficulties in handling defaulters, especially in
group based lending.

78
4.5.2 Clients Arrears Frequency and Management

3 plus
Arrears frequency

Never

0 5 10 15 20

No of respondents

Figure 4.7:: Clients arrears frequency

From the diagram 17% of the respondents have never been in arrears with regards to
their repayments to their respective MFI, 13%
% highlighted they have been in arrears on
one occasion, 19% have been in arrears twice and 22% on more than three occassions.
occassions
A greater percentage however (29%) of the respondents have been in arrears more
than three times. Further probing shows the following
following as reasons of failure, business
failure, limited resources, over indebtedness to many organisations.

A client who have never been in arrears advised that, he is a civil servant hence the MFI
captures the loan repayments at source through the SSB (Salary
(Salary Services Bureau),
hence there is not any chance of default. Another client shared the same sentiments but
lamented the high interest rates being charged by MFIs meaning that a huge portion of
their salaries are going towards loan repayments.

One clientt highlighted that she has been in arrears on several occasions and is actually
struggling to clear her debts. She indicated that she borrowed money from an MFI with
the intention of starting a sewing business and fend for her family, however,
however due to
other demanding needs, part of the money’s was used to pay school fees for her two
children. The proceeds from the sewing project are failing to pay of the loan from her

79
MFI and hence she is being pushed and continuously being followed up by the loan
officers from the institution. Another client advised of embarrassments faced in front of
children and other family members of being chased by loan officers for repayments.
This support assertions by Aryeetey 1996 as cited by Bastelaer (2006, p.13), who says
such harassments by officers serves the immediate purpose of trying to recover loaned
funds and the broader purpose of signaling publicly that the consequences of becoming
a defaulter can be made to be socially embarrassing, especially in a society where
credit and debt are considered private issues. MKNelly and Kevane (2002, p.2019) in
their studies of MFIs in Burkina Faso report cases wherein defaulters are losing
household items as well as being humiliated by police call outs. They note several
household items such as wall clocks, hand sewing machines, music systems, fridges,
sofas, beds that were seized from defaulters and offered for sale.

An interviewed RBZ official in as much as he acknowledged that many MFI clients are
saddled with many debts owing to various issues, lambasted the unethical and unlawful
methods most MFIs are using in trying to recover their moneys. He highlighted of the
proper acceptable channel which is to go through the courts, obtain judgment or default
judgment in their favour followed by issuance of a writ of execution. Attachment of
property should actually be done through the deputy sheriff. In simple MFIs should
institute legal action against defaulters other than taking the law in their own hands.

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4.5.3 Clients Borrowing Frequency (number of loans / facilities accessed)

14%

35% 1
2
24% 3
4 plus

27%

Figure 4.8: A summary of number of facilities/ loans accessed

From Figure 4.5 above, the greater percentage of the respondents (35%) has accessed
loans from more than four times, 27% have accessed loans three times, 24% twice and
only 14% are just starting. From the findings above, the indications are that a greater
majority of the clients surveyed are continuously in debt, as they have accessed
facilities more than four times. These findings concur with Professor Muhammad Yunus
who observed the issue of continuous indebtedness on the part of microfinance clients,
leading to forced sale of assets and destitution (Hashemi 1997, p.250).

81
4.6 MFIs Impacts on Individuals and Microenterprises

4.6.1 Clients’ Opinion on MFIs and the Microfinance Sector

22%
45%
Siginificant Improvement
No Improvement
33%
Negative Impact

Figure 4.9:: Impact on MFI clients’ welfare

From the findings summarized in the pie chart above, 22% of the clients highlighted that
MFIs have significantly improved their welfare, they have managed to enjoy the benef
benefits
of working with their respective MFIs. However, a greater percentage (45%), expressed
a negative impact on their welfare, with the remainder 33%
3 % highlighting
highl there is no
improvement, in other words their status core remains.

Though a smaller percentage (22%) of MFI clients surveyed indicated that there is a
significant improvement in their welfare, a greater percentage 33% highlighted that
there was no improvement, supporting findings by Coleman in 2004 on Impact studies
in South Asia who concludes that,
that, the impact of microfinance programs on committee
member’s wealth is positive, but on ordinary members wellbeing is insignificant. The
findings also concur with Mosley (2001, p. 112) who says, most households are better
with microfinance, but income impa
impact
ct vary in magnitude and durability, and a sizeable
proportion of clients find that their post credit incomes stagnate or fall. A greater
percentage (45%) of the clients indicated they have been negatively affected by
approaching MFIs, on further probing most clients say they approach MFIs because of
their circumstances. Most clients lamented the high interest rates charged by MFIs,

82
hence they find themselves highly indebted. Such assertions support statements by
Muhammad Yunus as cited by Hashemi (1997, p.250), when he highlights the high
interest rates leading to persistent indebtedness on the part of micro clients. The
findings also support, Hulme and Mosley (1996, p 134) who argue that, microcredit is
not a panacea for poverty reduction and in some cases the poorest people have been
made worse off. They further argue that, these contemporary schemes are actually less
effective than they might be.

The findings also concur with Hulme and Mosley (1996) who after their studies on the
impact of microfinance conclude poor households do not benefit from microfinance, it is
actually the non poor borrowers (with incomes above poverty lines) who can do well
with microfinance and thus enjoy sizeable impacts. Their other finding was that a vast
majority of those with starting incomes below the poverty line actually end up with less
incremental income after getting micro loans from MFIs.

4.6.2 MFIs Client outreach

The data showed that the 41 MFIs under survey had 231 187 clients and their loan book
was at $445, 830, 900. Such a finding shows that Zimbabwean MFIs outreach is very
low compared to Grameen Bank which had 2.4 million clients as of December 2000
(Meyer, 2005). The clients included Microenterprises, Male and Female. From the 41
MFIs under survey, research showed that 23% of their clients are microenterprises,
64% are employed mainly in the civil services and other jobs and 17% are those that
are surviving on personal income generating projects.

83
 13%
23%

Microenterprises
Employed
64% Self employed Individuals

Figure 4.10:: Pie Chart summarizing MFIs client outreach

From
m the summarized findings in the pie chart above, the greatest beneficiaries (64%)
of MFIs surveyed are those that have got some form of employment, with one
interviewed manager highlighting the civil servants as their major clients. This is
followed by the
e microenterprises (23%), those small businesses that have got a staff
complement between one and ten. The smaller percentage are the self employed
individuals who are into personal projects, an interviewed manager mentioned the cross
border traders, carpenters,
nters, welders, poultry projects amongst others.

From a critical assessment, the last group is very vulnerable in that they compete in
business with established firms and microenterprises, hence they are vulnerable to any
changes in their operating environ
environment.
ment. A manager with one MFI highlighted that these
are very risk compared to the employed that have a salary to turn to in the event of any
developments in the economy, hence most MFIs are not so keen to finance their
projects. The manager gave an exampl
examplee of an individual running a poultry project,
outbreak of diseases can run down the whole project leaving the project owner without
any fall back position. Such an observation therefore means the very poor who are
vulnerable are to some extent not being reached
reached by MFIs, or rather are not being
considered by same. The findings concur with those of Amin, Rai and Ropa in 2003,
who concluded that the very poor and vulnerable do not appear to be reached. In other

84
words, the poor are being reached, in this case the civil servants, with their salaries
below the poverty datum line as alluded to earlier, but the very poor in the rural areas
without any fallback position are being excluded.

The findings also agree with Buckley (1997, p. 1091) who says, despite the growth over
the last decade in micro enterprise credit programs throughout Africa, there appears to
be little evidence to suggest significant and sustained positive impacts on the supposed
beneficiaries, who are the poor and vulnerable in this case. Onyuma and Shem (2005,
p.201), agree to those assertions and highlight that, microfinance programs rarely reach
the poorest of the poor. The tiny loans required by the poorest people are too expensive
to deliver, especially in hard to reach or remote rural population. Montgomery (1996) as
cited by Onyuma and Shem (2005, p.201), also concurs when he maintains that
concerns on repayment rates exerts pressure on credit groups to exclude the poorest
who are likely to be hit hard by poverty and experience the greatest problems.

4.7 Chapter Summary

The chapter looked at the findings generated on the research topic, the role of MFIs on
poverty alleviation in developing countries, with specific focus on Zimbabwe. The
chapter reported findings starting from the response rate, demographic statistics,
purpose of loans and advances, MFIs business conditions and client satisfaction levels,
MFIs interest rates, loan delinquency and MFIs impacts on clients’ welfare.

85
 CHAPTER FIVE

5.0 CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter gives conclusions from the study that was undertaken. The previous
chapter centered on data analysis, interpretations and relates the data collected to
previous studies as well as other literature available. The chapter will therefore
summarize and derive conclusions from the research undertaken, evaluate the research
problem and proposition, and come up with recommendations to different players. In
this case recommendations will be to regulatory authorities, MFIs and their APEX
bodies.

5.2 Research Summary

The researcher drove motivation to undertake the study, mainly because of the levels of
poverty in developing economies like Zimbabwe, that is, the number of poor people and
households living on less that a $1 to $2 per day in terms of purchasing power parity
terms. This was also enhanced by the belief amongst the pioneers of the microfinance
movement that the MF industry can play a significant role in alleviating poverty as well
as spurring economic development.

The research was guided by the objectives and research questions in Chapter One.
Primary data collection entailed the distribution of questionnaires to MFIs and their
respective clients. The researcher also undertook some interviews with management of
some MFIs, RBZ officials as well as officials from APEX bodies like ZAMFI. The
findings are therefore based on 63 clients and 41 MFIs that responded to the
questionnaires as well as the interviews that were undertaken.

86
5.3 Conclusions

In this section the researcher will give conclusions to the research findings focusing
mainly on client outreach, MFI business conditions, loan delinquency and management,
purpose of loans and advances, demographics, and MFIs impact on individuals and
microenterprises.

5.3.1 Client Outreach

The researcher concludes that in as much as MFIs are assisting the poor with low
salaries, but the very poor who in most cases are vulnerable and without any fall back
position are not being assisted. This includes those found in rural areas and urban
areas living on less that $2 per day, whose lives are more or less near destitute.

5.3.2 MFIs Business Conditions

A critical analysis of the business conditions shows that in as much as the business
conditions are flexible on the security requirements, the other conditions like lack of
training in basic business management skills, high and unsustainable interest rates and
admin charges defeat the whole idea of MFIs serving the poor, in other words the
conditions are too heavy to such an extent they add more poverty.

5.3.3 Loan delinquency and Management

The researcher concludes that more and more poor people are falling in the debt trap,
as indicated by the rise in the default rates, it therefore means the chances of many
poor people loosing their assets to MFIs are high as they continue to be saddled with
debts. This is further worsened by the fact that the majority 51% have been in arrears
more than three times.

87
5.3.4 Purpose of Loans and Advances

From the research findings, the researcher concludes that the majority of MFI clients
access funds for consumption smoothening as well as to cater for emergences such as
medical. In as much as this is worthwhile, the challenge is that it keeps them in the debt
trap and does not generate additional income. A significant percentage access funds for
setting up personal projects and enhancing their microenterprises. However, a smaller
percentage acquire assets such as television sets, refrigerators amongst others.

5.3.5 MFIs Impact on Individuals and Microenterprises

The research findings show that MFIs and the microfinance sector in Zimbabwe have
no significant impact on the welfare of poor people, in other words most poor people
who are the vulnerable group have been made worse off. Microfinance institutions have
only benefitted the non poor borrowers.

5.3.6 Demographics

The researcher concluded that man and microenterprises are the greatest beneficiaries
of MFI programs, together contributing 86% of the respondents. Women in as much as
they are the majority of those severely affected by poverty are the least beneficiaries
contributing only 14% of the respondents. The economically active age group, the risk
takers and are also the major beneficiaries of which most of these have secondary and
advanced level education.

5.3.7 Legislation on MFIs and the Microfinance Sector

The researcher concludes that in as much as there is appropriate legislation that

governs the conduct of MFIs in Zimbabwe, the legislation has not been effective and
falls short on the international best practices of the microfinance sector. This has been
evidenced by the regulatory authorities (RBZ) issuing circulars to MFIs and Money

88
lending institutions as well as the subsequent cancellation of McDowells International
money lending license (Appendix 5 and 6).

5.4 An Evaluation of the Research Proposition

The problem statement questioned whether MFIs are alleviating poverty or are actually
putting poor people into more poverty. A research proposition was put forward to the
effect that MFIs in developing economies like Zimbabwe are not playing any role as far
as poverty alleviation is concerned, they are actually sinking them into deeper poverty.
The research results agree with those assertions that MFIs are actually not reaching the
vulnerable and needy poor and are actually living many poor people in a debt trap,
which they struggle to come out.

5.5 Recommendations

The researcher will put across recommendations to different categories of groupings

and organizations, in this case recommendations will be to Regulatory Authorities, MFIs
and their APEX Bodies (ZAMFI, ZAMLA).

5.5.1 Recommendations to Regulatory Authorities (RBZ, Ministry of Finance)

- The regulatory authorities should come up with interest rate caps on all MFIs.
Such an action will ensure that borrowers are not charged unsustainable interest
rates, such as the ones being charged by most Institutions. The RBZ has
recently (June and July 2012) cancelled operating licenses for two MFIs, namely
McDowell’s International and All Angels for violating Section 5 (3) of the Banking
Act [Chapter 24:20], which prohibits MFIs from accepting deposits. The
Institutions were also charging interest rates of 45% to 50% per month.

- The RBZ should increase MFIs minimum capital requirements from $5,000 to
$100,000. Such a move will prevent the sector from becoming a ‘market for all’,
as this would ensure properly governed institutions (Corporate governance) with
strong capital base to trade in the market.

89
- The Regulatory Authorities should come up with a Microfinance Code of
Conduct/ Microfinance Charter to govern the operations of MFIs. Such a move
will ensure ethical business practices as well as appropriate disclosure of
business conditions by MFIs, thus fulfilling their role of poverty alleviation and
economic development.

- The Regulatory Authorities should come up with a Credit Clearing Bureau for the
Microfinance Sector. Such a move will assist MFIs to manage defaulting clients,
thus controlling minimizing default rates.

- In presenting the 2012 Mid Year Fiscal Policy Review (18 July, 2012), The
Finance Ministry highlighted of a new Microfinance Act, which would create
deposit taking MFIs. In line with this, the researcher recommends the creation of
a Microfinance Depositors Security Fund (MDSF), which would subsequently
protect depositors in case of failed MFIs.

5.5.2 Recommendations to Microfinance Institutions (MFIs)

- MFIs should institute Capacity Building Training Programs for clients, such
programs will equip people with basic business management skills, records
keeping, basic bookkeeping, marketing not only in urban areas but rural as well
to ensure they expand their outreach thus playing their role in alleviating poverty
and economic development.

- MFIs are recommended to institute sustainable and justifiable interest rates, as

this will ensure they gain the confidence of their clients and increase their
outreach as well.

- MFIs are recommended to ensure ethical business practices as well as

observing international best practices for microfinance in the conduct of their
business.

- MFIs are recommended to broaden their product offerings by including products

like micro insurance.

90
5.5.3 Recommendations to APEX Bodies, ZAMFI, ZAMLA

- These APEX bodies are recommended to institute capacity building programs for
MFIs to strengthen and equip the institutions so that they are in compliance with
Laws and Regulations governing their operations.

- The APEX bodies are recommended to form and facilitate strategic partnerships
with donors and NGOs for the setting up of a Microfinance Fund, which will assist
local MFIs with funds for on lending and this will also ease the liquidity
challenges being experienced by many MFIs.

5.6 Areas of further study

This study focused on the role of microfinance institutions in poverty alleviation in

developing economies like Zimbabwe, this stemming from the fact that pioneers of the
microfinance movement such as Professor Muhammad Yunus in Bangladesh viewed
the area as being critical in alleviating poverty and economic development. However, it
will be of importance to study aspects like Corporate governance in the microfinance
sector, contributions of microfinance to economic development, service delivery by MFIs
as well as why established commercial banks in Zimbabwe seem to be venturing into
the microfinance sector.

5.7 Chapter Summary

In summary MFIs in Zimbabwe are not alleviating poverty which is contrary to the belief
by the pioneers of microfinance, that it is aimed at eradicating poverty and spur
economic development. In as much as MFIs are flexible in terms of security / collateral
requirements, their business conditions in terms of interest rates are unsustainable and
their outreach on the vulnerable poor is low. The chapter also includes
recommendations to the various stakeholders, that is, regulatory authorities,
Microfinance APEX bodies and MFIs themselves.

91
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Appendices

Appendix No 1: Articles Showing Auctioning of Property

100
 Appendix No 2: List of Registered MFIS
Name Head Office Address Region
1 Abantu Microcredit Pvt Ltd 1561 Finneran Road, Ardbennie, Waterfalls Harare
nd
2 Acceptable Benefits Pvt Ltd Suite 215, 2 Floor, Gelfand House, Harare Harare
nd
3 Advent Finance 2 floor, ZTA House, 95 Nelson Mandela Ave Harare
4 Afdaal Investments Pvt Ltd Suite 304, CIPF Centre, J Moyo Street, Harare Harare
5 Africa Century Pvt Ltd Africa Century Gardens, 153 J Chinamano Ave Harare
6 Aggma Pvt Ltd 402 Sterling House, J Moyo St, Box 1509, Byo Bulawayo
7 Alshaams Global Microfinance No 9 Hood Road, Southerton, Harare Harare
8 All Angels Investments Pvt Ltd No 2, Zimbabwe Court Building, Masvingo Masvingo
9 Allumez Capital Pvt Ltd The Cradle, 12 Baines Avenue, Harare Harare
10 Apek Financial Advisory Services 149 Acturus Road, Highlands, Harare Harare
rd
11 Applegrove Investments Pvt Ltd Office Number 80, 3 Street, Mutare Mutare
th
12 Belberry Enterprises Pvt ltd 9 Calenstale Flats, 11 Ave Parirenyatwa, Byo Bulawayo
nd
13 Bethel Finance Limited Pvt Ltd 2 Floor, Rennaisance Park, Borrowdake Road, Harare
14 Blue Financial Services Pvt Ltd 19 Banchory Road, Mandara, Harare Harare
15 Buildvest Pvt Ltd 5 York Avenue,Newlands, Harare Harare
th
16 Cablefin Finance Pvt Ltd 4 Floor, Goldbridge, Eastgate, Harare Harare
17 Calsev Finance Pvt Ltd 113A Herbert Chitepo, Mutare Mutare
18 Campion Capital Limited 12 Bryden Road, Mt Pleasent, Harare Harare
19 Candalick Finance Pvt Ltd 168 Chinhoyi Street, Harare Harare
20 Cemaj Investments Pvt Ltd Office No 3, New Market Centre, Masvingo Masvingo
th
21 Charming Chews Pvt Ltd 13 Floor, Karigamombe Centre, Harare Harare
nd
22 Clarion Financial Services Pvt Ltd 2 Floor, Blue Bridge, Eastgate, Harare Harare
23 Collarhedge Finance Pvt Ltd Mezzanine Floor, Kopje Plaza, Harare Harare
24 Collective Self Finance Pvt Ltd 28 Frank Johnson Ave, Eastlea, Harare Harare
st
25 Comoglobe Enterprises Pvt ltd 1 Floor, Onnon House, 116 Albion St, Harare Harare
26 Contact Microfinance Pvt Ltd No 63 J Moyo Avenue, Stanley House, Harare Harare
st
27 Coverlink Finance Pvt Ltd 1 Floor, Weatherby House, N Mandela, Harare Harare
28 Credfin Pvt Ltd No 9 Birchenough Road, Alexandra Park, Harare Harare
st
29 Capital Solutions Zimbabwe Ltd 1 Fl, Throgmorton House, S Machel Ave, Hre Harare
st
30 Daizlin Trading Pvt Ltd Office No. 2, 1 Floor Bata Building, Gweru Gweru
31 Darnster Enterprises Suite 5, Albion Flats, 127A Fort Street, Bulawayo Bulawayo
32 Denvalene Financial Services Zimpost Building, Tongogara St/ Hugh St Masvingo
rd
33 Diadem Finance Pvt Ltd Office No 1, 3 Floor, Robinson House, Harare Harare
34 Dockers Investments Pvt Ltd 11 Wycombe Road, Groombridge, Harare Harare
rd
35 Ecobridge Finance Pvt ltd 3 Floor, Goldbridge, Eastgate Shopping Mall Harare
th
36 Edgedeal Investments Pvt Ltd 4 Floor, Throgmorton House, S Machel Harare
37 Eido Finance Pvt Ltd 62 Homestead Road, Hatfield, Harare Harare
38 Embassy Finance Pvt Ltd Suite 618, St Barbra House, Cnr N Mandela/ Tak Harare
39 Epic Capital Pvt Ltd 21 Fourth Street, Mutare Mutare
40 Equality Microfinance Pvt Ltd Opportunity House, 19 Harvest Street, Avondale Harare
41 Evimoy Financial Services Pvt Ltd 23 Richards Avenue, Rhodene, Masvingo Masvingo
42 Extra Hands Finance Pvt Ltd Office No. 3, Anchor House, Bulawayo Bulawayo
43 Fastbucks Finance Enterprises No 1, Zandaam Court, Cnr Mazowe & Chinaman Harare
th
44 Fidelity Life Financial Services 4 Floor, Fidelity House, 66 Julius Nyerere Harare
rd
45 F. Kumirai Capital Partners P/L 3 Floor, Beverley Court, 100 N Mandela Harare
46 Finesse Microfinance Pvt Ltd 4th Floor, Beverley Court, 100 N Mandela Harare
th th
47 Finsha Pvt Ltd Suite 402, 4 Floor, Pioneer House, 8 Avenue Bulawayo
48 First Capital Plus 17074 Giraffe Crescent, Borrowdale West, Hre Harare
49 Flamstock Capital Pvt Ltd 1 West Avon Gardens, 5 Wicklow Road, Avondal Harare
nd
50 FMC Financial Services Pvt Ltd 2 Floor, Lintas Hse, 46 Kwame Nkrumah, Hre Harare

1
 st
51 Flash Financial Services Pvt Ltd No 9, 1 Floor, New Market Centre, R Tangwena Masvingo
nd
52 Four Seasons Finance Pvt Ltd Suite No 4, 2 Floor, Catherine Court, Harare
53 Get Bucks Financial Services 4 Arden Road, Newlands, Harare Harare
54 Gemini Financial Services Pvt Ltd Suite 2, Kubatana Centre, Hughes Street Masvingo
rd
55 Great Thanks Investments Pvt Ltd 3 Floor Left Wing, Msasa, 107 Herbert Chitepo Mutare
56 Green Masters Investments P/L 19 J. Tongogara Ave/ Blackston St, Harare Harare
57 Greenstrod Trading Pvt Ltd 2 Rekayi Tangwena Street, Masvingo Masvingo
58 Grileen Investments Pvt Ltd 4 Douglas Road, Workington, Harare Harare
th
59 Groveston Investments Pvt Ltd 4 Floor, Throgmorton House, S Machel Harare
60 Hamilton Finance Pvt ltd 215 Fife Avenue, Harare Harare
61 Hammer & Tongues M/ Lenders Shop 1A, Beverley Court, Harare Harare
62 Heading North Pvt Ltd 120 Murambinda Growth Point, Murambinda Murambin
63 Hifund Investments Pvt Ltd 36 Alexandra Drive, Greendale, Harare Harare
64 Hillthru Enterprises Pvt Ltd No. 3A, Hellet Street, Masvingo Masvingo
65 Homelink Pvt Ltd t/a Microlink 72-74 Samora Machel Ave, Harare Harare
th
66 Imali Capital Finance Pvt Ltd 8 Century Towers, 45 S Machel Avenue, Hre Harare
67 Imali Link Pvt Ltd No. 8, Worcester Avenue, Eastlea, Harare Harare
nd
68 Impesto Financial Services P/L 2 Floor, Globe House, 51 J Moyo Avenue, Hre Harare
69 Incusive Financial Services P/L 139 Jason Moyo, Bulawayo Bulawayo
70 Jakana Pvt Ltd Lot 5 arlington Estate, Harare Airport, Harare Harare
71 JHM Investments Pvt Ltd 9 John Plagis Avenue, Alexandra Park, Harare Harare
rd
72 KCI Management Consultants P/L Suite 301, 3 Floor Margolis Plaza, 2 Speke Ave Harare
rd
73 Kamlish Investments Pvt Ltd Suite 38, 3 Floor, New Africa House, Harare Harare
74 Kandim Investments Pvt Ltd 6 Cigma Court, 45 J Tongogara Street, Harare Harare
75 Karamack Investments Pvt Ltd 7 Faidiner Rd, Khumalo, Bulawayo Bulawayo
76 Kreamon Investments Pvt Ltd 320 Samora Machel Ave, Eastlea, Harare Harare
rd
77 Kenlon Financial Services Pvt Ltd 309 3 Floor, First Mutual Building, H Chitepo Mutare
th
78 Kenpert Investments Pvt Ltd 11 Floor, Bard House, 69 S Machel Ave Harare
79 Koach Rural Financial Services No. 48 Mchlerry Avenue, Eastlea, Harare Harare
80 Lalapati Investments Pvt Ltd Shop No. 40, Lobengula, Bulawayo Bulawayo
81 Landis Investments Pvt Ltd Room No 21, Specks Hotel, Kadoma Kadoma
82 Lien Enterprises Pvt Ltd 125 A Josiah Tongogara, Bulawayo Bulawayo
83 Limitless Trading Pvt Ltd 414 Pricewaterhouse, Jason Moyo St, Bulawayo Bulawayo
th
84 Lohn City Pvt Ltd No. 2 Harcourt House, 4 Avenue, Parirenyatwa Bulawayo
th
85 Lushonde Capital Finance Pvt Ltd 4 Floor, Chiyedza House, 68-40 K Nkrumah Harare
rd
86 Maple Ridge A & S Pvt Ltd No. 9 Capri Court, 3 Avenue/Main Street Bulawayo
st
87 McDowells International Pvt Ltd 1 Floor, Old Mutual Building, Masvingo Masvingo
88 Metronite Investments Pvt Ltd 17051 Kelvin West, Bulawayo Bulawayo
89 MicroKing Savings & Credit Co 70 Park Lane, Harare Harare
th
90 Microcredit Africa Pvt Ltd 2 San Fernando Court, Cnr 5 /Fife Ave, Harare Harare
th
91 Micropal Finance Pvt Ltd 8 Floor, Pegasus House, 52-54 S Machel Ave Harare
92 Midfriar Investments Pvt Ltd No 3 Drummond Chaplin Rd, Milton Park, Hre Harare
th
93 Minanah Capital Pvt Ltd 69 S Machel Ave, 8 Floor, Bard House, hre Harare
94 Money Method Finance Pvt Ltd 25A Main Street/ First Avenue, Bulawayo Bulawayo
th
95 Montess Microfinance Pvt Ltd 4 floor, Goldbridge South, Eastgate, Harare Harare
th
96 Microplan Financial Services P/L 4 Floor, FBC House, 113 Leopold Takawira Harare
th
97 Moreyields Investment Pvt Ltd Suite 804, 8 floor, CIPF Centre, J Moyo Bulawayo
98 Multiridge Finance Pvt Ltd Building No. 5, Arundel Office Park, Mt Pleasent Harare
th
99 Nash Micro Capital Pvt Ltd 7 Floor, 123 Dolphin House, L Takawira Harare
100 Nelhurst Trading Pvt Ltd No. 2 Wembley Crescent, Easlea, Harare Harare
th
101 Neverseez Capital Pvt Ltd 8 Floor, CABS Centre, 74 Jason Moyo Harare
102 Newhan Finance Services P/L No 11, Peedles Road, Eastlea, Harare Harare
th
103 Newrock Finance Pvt Ltd 7 Floor, Red Bridge, Eastgate Complex, Harare Harare

102
 th
104 Nissi Global Finance Pvt Ltd No 4, Peppermint Place, 11 Ave, byo Bulawayo
105 Oracle Finance Pvt Ltd 134 Twickenham Drive, Mt Pleasant, Harare Harare
106 Osara Enterprises Pvt Ltd No 88 Ruzende Street, Engineering House Harare
rd
107 Oxlink Capital Finance Pvt Ltd 3 Floor, The Insurance Centre, 30 S Machel Harare
108 Paradyme Financial Services P/L 74 George Silundika Avenue, Harare Harare
nd
109 Paramount Holdings Pvt Ltd Office No 1, 2 Floor, Kuwirirana House Harare
110 Partner Finance Pvt Ltd 71 Sam Nujoma Street, THI House, Harare Harare
111 Pockets Investments Pvt Ltd No. 6 Percy Avenue, Bulawayo Bulawayo
112 Postgate International Pvt Ltd 168 Samora Machel Avenue, Harare Harare
113 Portify Investments Pvt Ltd 113 Unifreight House, Bulawayo Bulawayo
114 Postate Investments Pvt Ltd 19 Salcombe Close, Bradfield, Bulawayo Bulawayo
115 Postfield Investments Pvt Ltd 76 R. Mugabe Street, Office No 7 Kadoma
116 Potphill Investments Pvt Ltd Suite 2, Block 1, Athanasia Court, Eastley Harare
117 Prestigious Finance Pvt Ltd No. 122, Kwame Nkrumah Ave, Harare Harare
118 Protege Pvt Ltd Suite No 2, Maringe Court, 25 Main Street Gweru
th
119 Provident Finance Pvt Ltd 9 Floor, North Wing, Pax house, Harare Harare
st
120 Quest Financial Services P/L 1 Floor, Social Security Centre, Harare Harare
121 Ratchet Enterprises Pvt Ltd 102 Churchill Road, Gunhill, Harare Harare
th
122 Rollerpad Finance Pvt Ltd 1107 11 Floor, Regal Star House Harare
123 Saboth Financial Services 16 Hondohwe Street, Zengeza Chitungw
124 Sahwira Financial Services 6270 St Josephs, Chikanga 3, Mutare Mutare
125 Sandgate Enterprises Pvt Ltd 58 Homestead Road, Hatfield, Harare Harare
th
126 Seashore Trading Pvt Ltd 4 Albion Flats, Cnr Fort Street/13 Avenue Bulawayo
127 Segel Finance Pvt Ltd 19 ward Road, Braeside, Harare Harare
128 Sendoff trading Pvt Ltd 142 Nelson Mandela Avenue,Harare Harare
129 Scotehcorp Enterprises Pvt Ltd Suite 520, Anlaby House, 35 Nelson Mandela Harare
130 Seddon Investments Pvt Ltd Shop No 6, Parkade Centre, Bulawayo Bulawayo
nd
131 Shantoni Finance Company P/L 2 Floor, Anglican Diocese Building, Harare Harare
th rd
132 Share Wealth Pvt Ltd 5 Floor, Travel Centre, Cnr 3 Street & J Moyo Harare
th
133 Shons Financial Services P/L 2 Othitis Building, 720 6 Street, Gweru Gweru
134 Simukai Financial Services P/L 14177 Gunhill Avenue, Gunhill, Harare Harare
135 Sissoko Investments Pvt Ltd Suite 217, Pax House, 87-89 Kwame Nkrumah Harare
th
136 Soledd Pvt Ltd Suite 20, 4 Floor, Barts House, 32 Jason Moyo Harare
137 Solten Financial Services P/L 50B Herbert Chitepo Street, Mutare Mutare
th
138 Spaven Trading Pvt Ltd 4 Floor, Eastwing, Robinson House Harare
nd
139 Sparkles Services Pvt Ltd Suite 14, 2 Floor, Wilrose Court, Harare
st
140 Sport Talk Investments P/L 114 1 Floor, Unifreight House, L Takawira Bulawayo
141 Stepping Stone Finance P/L Stand Number 1996, Batonga, Kariba Kariba
142 Stone Microfinance P/L 54 Selous Avenue, Harare Harare
th
143 Stonleigh Investments P/L 4 Floor, CIPF House, Suite 404, J Moyo Bulawayo
nd
144 Stratfin Services Pvt Ltd 11 Treger House, 2 Floor, J Moyo St/12 Ave Bulawayo
145 Suctrin Enterprises Pvt Ltd 6A Fife Street Avenue, Bulawayo Bulawayo
146 Tantieme Finance Company P/L 28 Wingate Road, Highlands, Harare Harare
nd
147 Taroth Investments Pvt Ltd 2 Floor, Dolphin House, 123 Leopold Takawira Harare
148 Tazmac Pvt Ltd Cnr R Mugabe/ Inez Terraze, Asia House Harare
149 Tanvin Investments Pvt Ltd 2099 Benjamin Burombo Ruwa
150 Teebox Investments P/L Stand 3269 Nyamhunga, Kariba Kariba
st rd
151 Thornborn Marketing Pvt Ltd 1 Floor, Chester House, Cnr 3 St/ Speke Ave Harare
st
152 Tottengram Investments P/L 1 Floor, Partmar House, Eastlea Shopping Harare
153 Trade Finance Company Pvt Ltd 19 Van Praagh Ave, Milton Park, Harare Harare
st
154 Trioperfect Investments Pvt Ltd 1 Floor, Office Block, No 72 George Silundika Harare
st
155 Untu Microfinance Pvt Ltd 1 Floor, Insurance Centre, 30 Samora Machel Harare
156 Vain Court Microfinance Pvt Ltd 21 Bradfield Road, Hillside, Harare Harare

103
157 Valuerich Enterprises Pvt Ltd Office No 9, R Mugabe way, Old Victoria Hotel Masvingo
158 Vantage Microfinance Pvt Ltd 12 Cleverland Ave, Milton Park, Harare Harare
159 Virgin Microfinance Pvt Ltd Stand No 845, Golden Stairs Road, Mt Pleasent Harare
160 Virl Pvt Ltd 1 Waterfield Road, Mt Pleasant Harare
161 Visible Target Pvt Ltd Office 6, Apollo Court, Main Court, Gweru Gweru
162 Walina Trading Pvt Ltd 38 Cumerland Road, Eastlea, Harare Harare
163 Wesspools Pvt Ltd 9065 Budiriro 5, Harare Harare
164 Westrand Investments Pvt Ltd No. 53 Robertson Street, Masvingo Masvingo
rd
165 Witha & Sons Financial Services 3 Floor, Beverley Court, 100 N Mandela Ave Harare
th
166 Wintron Financial Services P/L 313 Kingdom Building, 9 Ave/J Moyo Street Bulawayo
th st
167 Yambukai Holdings Pvt Ltd 5 Floor, Chiyedza House, Cnr 1 / K Nkrumah Harare
th
168 Yonder Rift t/a Bridging Finance 5 Floor, North Wing, Hungwe Hse, 69 J Moyo Harare
169 Zambuko Trust No 6, Aberdeen Road, Belgravia, Harare Harare
th
170 Zansi Microfinance Pvt Ltd No 22A Loma Court, 4 Avenue, Bulawayo Bulawayo
rd
171 Zimnat Financial Services Zimnat House, Cnr 3 / N Mandela St, Harare Harare
st
172 Zenith Financial Services P/L 1 Floor, Memorial Building, 35 S Machel Ave Harare

104
APPENDIX 3: SCHEDULE OF REGISTERED SACCOS UNDER NACSCUZ
REGION NAME OF SACCO STATUS LOCATION
Harare Chawada Active Harare
Chitungwiza Active Chitungwiza
Commercial Workers Active Waterfalls, Harare
Forces Reliance Not Active Avenues, Harare
Jurani Firi Santa Not Active Chitungwiza
Municipality of Active Mbare, Harare
Harare
Progressive Woman Active Harare
PTC Active Harare
Transcoop Active Glendale
University Active UZ, Mt Pleasant, Hre
Women Active 20 Park Street,
Development Harare
ZICCU Active Harare
Zvaringana Not Active Chitungwiza
ZIMTA Active Harare

Bulawayo Bulawayo Active Bulawayo

Community
City of Kings Active Bulawayo
Los Angeles Not Active Bulawayo
Lugwama Active Bulawayo
Bee Tee Active Bulawayo
Voyager Not Active Bulawayo

Manicaland Big Wheels Active Mutare

Border City Active Mutare
Karina Active Mutare
Checheche Not Active Chipinge
Humbolt Not Active Buhera
Mashonaland East Musami Active Murehwa
Mutoko Active Mutoko Growth Point
Neshungu Active Dema Growth Point
Silveira House Active Chishawasha

Mashonaland Central Takura Nyakasikana Active Mt Darwin

Mashonaland West Kusi Not Active Mhondoro

Magunje Active Magunje Growth
Point
Mhondoro Active Mubaira
Spinners Active Kadoma
Zvipani Active Zvipani Business
Cntre
Masvingo Chivi Active Chivi Growth Point
Gutu Mupandawana Active Mupandawana

105
 G/Point
Jeka Active Chivi
Kurai Not Active Chivi
Masvingo Not Active Mucheke, Masvingo
Mkwasine Active Mkwasine Sugar
Estate
Matebeleland Tshinoni Active Beit Bridge
Bengale Active Gwanda
Hwange Megasave Active Hwange Colliery
Lupane Active Lupane Growth Point
Sibambene Active Gwanda
Zezani Active Zezani Business
Centre
Pfumisa Lushaka Active Beit Bridge
Selonga Not Active Beit Bridge
Midlands Bucedakulya Not Active Gokwe
Chingezi Not Active Mberengwa
Interchem Active Kwekwe
Kwekwe Municipal Active Kwekwe
Workers
Mabasa Active Zvishavane
Mapfungautsi Active Gokwe
Maranda Not Active Mwenezi
Masase Active Mberengwa
Mataruse Kubatana Active Mberengwa
Mazvihwa Active Mberengwa
Musume Active Zvishavane
Mutuvi Not Active Mberengwa
Muzambiringa Active Kwekwe
Negove Not Active Zvishavane
Ntalale Not Active Gwanda
Ntepe Not Active Gwanda
On Track Active Gweru
Tinoedza Active Zvishavane
Zimwire Not Active Kwekwe

106
APPENDIX No 4: Interview Guide Questions
a) Questions to Regulatory Authorities (RBZ)
1. What parameters do you consider in the licensing of MFIs in Zimbabwe?
2. Please comment on the MFIs Minimum Capital requirement of $5,000.00, in
relation to the role the sector plays in economic development.
3. In your opinion, how do you rate the performance of the microfinance sector in
Zimbabwe compared to other developing economies?
4. What is your comment on the conduct of MFIs in Zimbabwe?
5. What do you think your organization can do that which you are not doing to
further enhance the performance of the microfinance sector?
6. MFIs are becoming unpopular, both in public circles and the print media over a
number of unethical conducts, what is your position as an organization on those
accusations?
7. In your opinion, are MFIs playing their role in poverty alleviation and economic
development?

b) Questions to APEX Bodies (ZAMFI, ZAMLA)

1. In brief, just summarize the exact role of your organization as far as the
microfinance sector in Zimbabwe is concerned?
2. What role if any, does your organization play in the registration of MFIs in
Zimbabwe?
3. May you please detail, in brief, some of your achievements as far as the
microfinance sector is concerned?
4. In your opinion, how do you rate the performance of the microfinance sector in
Zimbabwe compared to other developing economies?
5. What is your comment on the conduct of MFIs in Zimbabwe?
6. What do you think your organization can do, that which you are not doing to
further enhance the performance of the microfinance sector?
8. MFIs are becoming unpopular, both in public circles and the print media over a
number of unethical conduct, what is your position as an organization on those
accusations?

107
9. In your opinion, are MFIs playing their role in poverty alleviation and economic
development?

c) Questions to MFIs
1. What type of facilities and products does your organization offer?
2. In general what is your target market and who are your major customers?
3. In brief, just give an outline of your business conditions that is, facility limits,
tenor, interest rates, security requirements, and repayment terms, amongst
others.
4. MFIs have been accused being unethical in the conduct of their business, what is
your position on those accusations?
5. What has been the trend of loan defaults over the past three or so years, and in
your opinion, what do you think are the reasons behind such a trend?
6. In your opinion, how do you rate, your clients feedback on the products and
services that you offer?
7. In you opinion what has been the impact of microfinance on the welfare of
Zimbabweans in general?
8. What role do you think organisations like RBZ, ZAMFI, and ZAMLA can play in
the microfinance sector in Zimbabwe?

108
Appendix No 5: RBZ Circular to MFIs and Money Lending Institutions

109
Appendix No 6: Cancellation of McDowells International ‘s Lending License

110
Appendix No 7: Questionnaire Covering Letter
14th June 2, 2012

University of Zimbabwe (UZ)

P. O. Box MP 167
Harare

Dear Sir/Madam

RE: RESEARCH QUESTIONNAIRE

The researcher is a Masters in Business Administration student with Graduate
School of Management (UZ) and is undertaking a research study on the topic:
The role of Microfinance Institutions in Poverty alleviation in developing
economies: The Case of Zimbabwe.

You have been chosen as one of the respondents to help and assist with some
information on the topic. You are being kindly requested to complete the
questionnaire attached. The information you provide will be used for academic
purposes only and will be treated in strict confidence.
Should you require clarification on the matter, please conduct the researcher on
his mobile numbers 0772 101 234/ landline number 04-781369.

Your Assistance in this matter will be greatly appreciated.

Yours Sincerely

Munyaradzi Chakatsva

111
APPENDIX No 8: Client Questionnaire

Section One: Introduction (Demographic Section)

a) This section relates to Microenterprises / Companies

1. Type of
Microenterprise………………………………………………………………………
2. Number of years in
business…………………………………………………………………
3. Number of employees (If any other than business owners /
shareholders)………………..
4. Respondent Position (Please tick appropriate box)
Owner/ Director
Manager
Supervisor
Office Staff

b) This part relates to individuals / Sole Trader

1. Age (Please tick in appropriate box)

Below 25 years

Between 25-35
years
Between 36-45
years
Between 46-55
years
Over 55 years

2. Gender (Please tick in appropriate box)

Male
Female

3. Educational Qualifications (Highest level of education)

O’ Levels
A’ Levels

112
 Certificate
Diploma
Degree (& Plus)
None of the Above

4. Purpose of loan
Personal
Loan
Business
Loan

5. Number of years in business…………………………………………………………

SECTION TWO: BUSINESS DETAILS

1. Nature of business (Sector)

Agriculture
Commodity Broking
Manufacturing
Services
Retail
Transport
Mining
Other

2. Source of capital……………………………………………………………………….
3. How long have you dealt with your Microfinance Institution…………………………
4. Please detail the services/ products that you receive from the Institution you deal
with…………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
5. How many facilities have you accessed from the
Institution…………………………….

6. Please indicate purpose of loan facility application.

Working capital

113
 Order financing
Consumption /
Educational
Asset Financing
Start Up Capital
Medical
Other
If other, please
specify……………………………………………………………………………………
…

7. Please itemise the requirements for you to qualify for a loan

facility………………………………………….
i. ………………………………………………………………………………………
…………………………………………………
ii. ………………………………………………………………………………………
…………………………………………………
iii. ………………………………………………………………………………………
…………………………………………………
iv. ………………………………………………………………………………………
…………………………………………………
8. Please detail the business conditions you receive from your institution, in terms
of…
i. Interest rates………………………………………………………………………
ii. Tenor of facilities………………………………………………………………..
iii. Admin charges (if any)…………………………………………………………..
iv. Any other charges………………………………………………………………
v. Facility amounts…………………………………………………………………
vi. Any other conditions not listed
above………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
9. Type of security offered

Mortgage Bond/ Title Deed

Movable Property (Motor Vehicles)
Household Items (Stoves,
Refridgerators, TVs, etc)
Business Machinery/ Equipment
Salary Based
Other

114
 If other please
specify……………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………

10. Whats your opinion with regards to the business conditions offered by your
institution?
Very satisfied
Satisfied
Not Satisfied
No choice

Please
comment…………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………..
11. What repayment methods on loan facilities does your institution apply?
Monthly debit order / stop
order
Cash payments/RTGS

12. How often have you been in arrears with your loan repayments?
Never
Few occasions (>5 )
More than often
Always
13. Please explains the reasons of your going in arrears?
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………

115
 ………………………………………………………………………………………………
………………………………………………………………………………………………
14. What measures have your institution taken on your being in arrears?
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………

15. Whats your position/comments with regards to the measures taken?

Very professional
Not professional
No Choice

16. In your opinion what has been the effect or rather impact of Microfinance on your
welfare and business project?
Significant positive
Improvement
No improvement
Negative Impact

17. Do you think MFIs are playing a positive role/negative role in alleviating poverty
in the country?
Yes
No

Justify your
answer……………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
…

18. In your opinion, what do you suggest the regulatory authorities like RBZ, Ministry
of Finance do with the Microfinance sector in Zimbabwe, to ensure efficient
service delivery and enhancement of people’s

116
lives?........................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.....................................................

Thank You!!!

117
APPENDIX No 9: MFI Questionnaire
Section One: Introduction

1. Title of respondent……………………………………………………………………….
2. When was your organisation stated.………………………………………………….
3. Staff
compliment…………………………………………………………………………..
4. Number of
Branches………………………………………………………………………..
5. Holding Company/ Associate Companies name (if
any)………………………………..

Section Two

1. Size of portfolio (number of clients)……………………………………..

2. Loan Book over the past 3 years
2009……………………………………………………………….

2010……………………………………………………………….

2011………………………………………………………………
3. Sectorial Analysis of Portfolio(In percentage form)
Agriculture
Manufacturing
Mining
Transport
Educational /
Consumption
Services
Other

4. What types of facilities does your organisation offer?

Working capital
Order Finance
Consumption/
Educational/Medical
Start Up Capital
Asset Financing
Other

If other please
clarify………………………………………………………………………………………

118
 ………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
5. Tenur of Loan facilities
One month
3 Months
6 Months
9 Months
One Year
Other

If other please
clarify………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
…………..…………………………………………………………………………………
6. Facility Limit, Minimum and Maximum

Minimum
Maximum

7. Interest rates
………………………………………………………………………………………………

In the event of a defaulting client, does your organisation charge penalty interest
rate
Yes
No

If yes what is the penalty

rate…………………………………………………………………………………………
..
8. Other than the interest rate on facility does your organisation have other charges
(e.g Loan administration charges)
Yes
No

If yes please clarify the types of charges and the applicable rates /
fees…………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………

119
9. Does your organisation request for security on loan / facility applications

Yes
No

If yes please clarify the types of security acceptable

………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
……………………………..
10. What has been the default rate on loan or facility applications over the past three
years
Year Rate
2009
2010
2011

i. What do you think are the reasons behind loan

defaults……………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………

ii. What in your opinion do you think are the reasons for that trend over the
three years to 2011.
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
iii. What methods do you employ in recovering loans that are in default and what
has been the success rate over the past three
years?.................................................................................................................
............................................................................................................................
............................................................................................................................
............................................................................................................................
........................................................

11. What is the turnaround time in processing of a facility

120
 Days
Weeks

Clarrifications on turnaround time if

any…………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………

12. Please list the various products that you offer

………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………

13. What repayment methods does your organisation employ (e.g. stop
order)?.....................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.....................................................................................................
14. From the feedback that you get from your clients and your own experiences, how
do you rate your client’s feedback on the products and services that you offer?
(Please tick)
Highly Satisfied
Satisfied
Unsatisfied
Indifferent
Any comments on
feedback…………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
……………………………………………………………….

15. In your opinion what has been the impact of Microfinance on the welfare of
Zimbabweans in
general?...................................................................................................................
.................................................................................................................................

121
 .................................................................................................................................
.................................................................................................................................
............................................................
16. In your opinion, what role do you think organisations like ZAMFI, RBZ, ZIMLA
can play in the Microfinance sector in
Zimbabwe?..............................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
.................................................................................................................................
...........................................................................

Thank You.

122