By Tawanda Mpoperi
The need for client protection when it comes to microfinance has never been more important than it is now in such a complex economic environment and in an industry with such a high number of players.
According to the Reserve Bank Monetary Policy Statement for 2020, there are 212 microfinance institutions in operation. With so many microfinance institutions and the rapid digitalisation of business processes, as well as unregistered institutions advertising what appear to be attractive loans, it is easy in such a dynamic environment to be taken advantage of and caught up in a debt trap.
It is in these uncertain times that client protection becomes imperative to ensure a high level of ethics and integrity in the microfinance industry.
Armed with the Microfinance Act regulators have made a decent endeavour to place client protection at the forefront of the service delivery standards expected of registered microfinance institutions.
It is important for every borrower to know these service standards and be wary of any attempt to expose them to potentially harmful financial situations.
Microfinance institutions are permitted to operate only when fully licensed and registered with the Reserve Bank of Zimbabwe. In order to safeguard your wealth and peace of mind it is important that you engage only with a registered microfinance institution that operates in compliance with client protection regulations.
Every registered microfinance institution is issued annually with a certificate, which it is required to display prominently wherever it conducts its business.
Borrowers need to be wary of a recent trend that has emerged in the economy of some unregistered lenders who come under the guise of offering guaranteed instant loans with lax loan application requirements and in turn charge exorbitant interest rates.
A number of unfortunate borrowers have fallen prey to these unregistered lenders and have lost their entire life savings in the process. However, when you deal with registered institutions, on the other hand, there is a set outline for recourse to the regulator which guarantees you of professional and ethical conduct from your microfinancier.
Integrity and transparency are significant factors that any borrower should expect in all transactions with a lending institution.
The Microfinance Act provides a clear outline of the need for full disclosure of interest rates and all other charges on loans to borrowers.
In addition to the requirement that these charges be stipulated in the loan agreement, the Act requires that loan charges be prominently displayed at the premises operated by the microfinance institution.
This is required so that every potential client of a registered institution is made aware of the charges and can make an informed decision to borrow without being deceived by material facts put in fine print.
One major issue that unregistered lenders find difficult to disclose to would-be clients is the high costs and risks associated with borrowing, as borrowing comes with its own potential pitfalls, primarily the risk of becoming over indebted.
Uncontrolled borrowing can lead to a situation where debt obligations outweigh the available income. This is a very uncomfortable position to be in.
With the current fluid economic conditions, the propensity among individuals to borrow increases, as people try to subsidize strained incomes. Given these precarious circumstances it may lead one to take out more loans than they can afford and end up overburdened with debt.
Although potential borrowers consciously apply for a loan in the full knowledge of their existing obligations, it is incumbent upon the lender to protect the client by ensuring that the borrower is not already suffering from too much debt.
With the help of the Reserve Bank, a Central Credit Registry has been established where all credit obligations to financial institutions are recorded. This is one of a raft of measures put in place to ensure that financial institutions and would-be borrowers alike are not exploited.
It allows any registered credit institution to cross-reference information about a borrower to verify his or her credit status and help assess the client’s borrowing capacity.
During the normal business of a microfinance institution, employees will come across confidential financial and business strategy information provided by borrowers for credit purposes.
Data protection principles require that this information be used only for the purposes for which it was requested. Should any member of a microfinance institution access your information for any purpose other than that for which it was initially obtained, you have a right of recourse.
Zimnat Microfinance has been in existence since 2012. It boasts of a solid financial background being, as it is, part of the Zimnat family.
Deliberate efforts have been made to guarantee client protection. Client protection principles have been embedded in the entirety of our service delivery channels, systems and processes.
With Zimnat, you can rest assured that you will be served by professionally trained staff offering high quality and affordable products and services to meet your financial needs. With branches and resident agents located across the whole of Zimbabwe, we strive to ensure efficient and excellent client service to meet your needs and make your life better.
Zimnat is a diversified financial group operating in Zimbabwe and associated with Sanlam South Africa, the largest non-banking financial services group on the continent. Zimnat has four business units, namely Zimnat General Insurance, Zimnat Life Assurance, Zimnat Financial Services and Zimnat Asset Management.
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