MFIs should embrace technology to survive Covid-19

THE Zimbabwe Association of Microfinance Institutions (Zamfi) has called on its members to embrace digital platforms if they are to survive the adverse impact of the Covid-19 pandemic.

The deadly disease was first detected in China last December and has now spread across the globe killing close to one million people. In Zimbabwe, the disease was detected in March and so far over 6 000 people have been with about 195 deaths and about 5 000 recoveries.

In line with the World Health Organisation (WHO) guidelines and protocols, Zimbabwe has embarked on lockdown measures to curb the spread of the disease. Business operators have been heavily affected by the lockdown restrictions with technology coming in handy. Zamfi said it conducted a mini survey on the impact of the Covid-19 on the microfinance sector whose outcome revealed the need for players to urgently embrace digital service platforms.

“It was quite evident from the survey findings that the old model of brick and mortar in terms of branch network is no more relevant and worth investing in for the majority of MFIs, especially those still keen to remain viable and profitable in the lending business,” said the microfinance association.

“The only lucrative and viable option is to embrace digital services platforms associated with cost reduction, limited human to human interaction, efficiency in service delivery and high productivity.”

Zamfi said the establishment of agent networking systems especially for rural population could be a game changer for some MFIs willing to support developmental lending among them small holder farmers.

“The Covid-19 pandemic situation is most likely to be with us for a very long period of time until a real breakthrough in vaccines and drugs for its treatment is found. Therefore, the protection of health for frontline staff at the workplace involved largely in collection of outstanding loans, including senior management tasked with strategic leadership of the company shall remain a top priority,” it said.

“Portfolio quality is likely to remain a challenge and as such MFIs should be willing to be flexible in rescheduling existing loans while at the same time structuring new loan agreements in a manner that helps clients to easily repay their loans.”

The report also confirmed that it has now become harder for MFIs to access funding from shareholders, bank and investors.

“This was indicated to be the case by 65,96 percent of the respondents while 14,89 percent noted that it is no different from the period before the lockdown,” said Zamfi.

In the report, the microfinance association said 73,91 percent of the respondents were strongly worried about the future profitability and sustainability of the microfinance sector. Only 4,28 percent are still optimistic about the sector.

Among other measures, Zamfi said remaining viable and operational requires members to conduct strict assessments of clients before loan approval, closure of branches to cut costs as well as retrenching some of the staff, introducing working shifts to reduce number of staff in offices as well as reducing loan tenure to manage repayment risk.–

Leave a Reply

Your email address will not be published. Required fields are marked *