By Farayi Machamire
Viability challenges and Zimbabweans’ inability to repay loans has resulted in 1 521 moneylending companies closing down in the past 14 years, amid fears the biting liquidity crisis will result in more microfinance companies twisting in the wind.
Observers, however, believe microfinance institutions play a critical role in providing finance to smaller businesses which are shunned by the larger commercial banks due to perceived high default rates.
According to statistics from the Reserve Bank of Zimbabwe, as at March 2017, there were 179 moneylending institutions, an extreme reduction from 1 700 in 2003.
“Please take notice that during the period January to March 2017, the Registrar of Microfinanciers registered the following additional (five) institutions,” Registrar of Microfinanciers said last week.
“This brings the number of institutions authorised to conduct business of providing loans in terms of the Microfinance Act (Chapter 24:29) to 179 as at March 2017.”
As at December 31, 2003, there were 1 700 registered microfinance and moneylending institutions, according to the monetary policy of that year.
Zimbabwe Congress of Trade Union (ZCTU), secretary-general Japhet Moyo said it was no surprise that moneylending companies were going bellies up and rendering thousands jobless.
This comes as non-performing loans — which will never be repaid, in full or at all — have become the biggest risk to the banking system’s stability.
“The possibility that people cannot payback is high, typically almost everyone is insolvent. Don’t be fooled by the flashy cars being driven in town, if you go deeper you will find that those people are technically insolvent,” Moyo told the Daily News on Sunday.
Zimbabwe’s main labour federation said the only people living luxurious lives were hiding behind their political links to bleed banks dry.
“The people we think are rich in Zimbabwe, many of them are giving banks a hard time. You may find that if they fall out with the governing party they will have their assets attached,” Moyo said.
Efforts to obtain statistics on the current number of companies on the register did not bear fruit as officials at the registrar of companies said they could not divulge such information without the consent of the registrar of companies, Martha Chakanyuka who was out of the office on Friday.
However, on June 23, Chakanyuka made notice in a government gazette that she had struck off 11 companies from the register, indicative that more jobs were being lost in the formal sector.
Companies are struck off from the register on the request of the firm itself after cessation of business activities or for failing to submit annual returns for more than two years.
Among the companies that were struck off the register were clothing giant Markhams Outfitters that had been operating in Zimbabwe for 37 years since registering on August 15, 1980.
Maestro Investment that registered on May 24, 2002 and Exact Zimbabwe Private Limited that had been operating for 37 years following its registration on August 15, 1980 were also struck off from the register.
TNT Express Worldwide that registered on January 20, 1993 and J R James Seventeen Private limited that had been operating for the last 19 years also went bellies up, Chakanyuka announced in the government gazette.
At the same time workers are also battling to hold onto their jobs in the insurance sector.
Statistics from the Insurance and Pensions Commission (Ipec) fourth quarter report for the year ended December 31, 2016, paint a gloomy picture.
“Total fund membership fell by 24 percent from the prior year figure of 344,198 as at year ending December 2015 to 262,085 at the year ending December 2016,” Ipec said in their fourth quarter report at the end of 2016.
“This could be due to the company closures that are taking place in the economy or retrenchments.”
The sector is in the woods with Ipec’s commissioner Tendai Karonga, earlier this month, threatening to de-register more insurance companies and brokers amid an upsurge in complaints of failure to meet client claims in the wake of a worsening economic situation.
Other sectors that have been hit hard by company closures is the millers.
At least 109 milling companies closed down in the past eight years amid fears that the Mandatory Food Fortification programme will result in more milling companies closing shop, according to statistics from the Grain Millers Association of Zimbabwe.
Industry experts reason that these companies used to employ an average of 120 people each, both indirectly and directly, and this translates to about 13 000 people who have lost their jobs between 2009 and May this year. Daily News