Abstract
The research study was aimed at exploring the inhibitors of micro financing institutions in Zimbabwe. The research objectives of the study were to find out the challenges faced by Zimbabwean MFIs in providing services to the informal sector, to investigate how MFI requirements are inhibiting their performance and to determine strategies that need to be adopted by MFI to stimulate better performance. Descriptive research design was used to get data and Closed and open ended questionnaires were administered in six provinces of Zimbabwe targeting government institutions, microfinance institutions and beneficiaries of microfinancing. In-depth interviews were conducted to policy makers in Zimbabwe. The target population for this study was 298 (comprising of MFI managers, beneficiaries and government institutions) and 5 policy makers respectively. A sample size of 169 was used. The study revealed that, microfinancing operations in Zimbabwe are being crippled by poor management skills which is blocking them to achieve their goals and objectives, again minimum capital requirements levied to them by the policy makers is also a stumbling block for MFIs performance, lack of sound capacity to attract long term loans from foreign direct investment and non-performing loans are also among the stumbling block for MFIs performance. DOI: 10.5901/mjss.2016.v7n3p31
Highlights
Micro Finance Institutions (MFIs) play a pivotal role in the provision of services to the financially excluded population, the informal sector and poor
The analysis showed that increased competition reduces the number of borrowers, resulting in MFIs becoming inefficient with increased competition
The remained 45.5% showed that operational risk management has not helped improving their performance neither will it improve in the future. the results shows that most MFIs are not familiar with operations risk management this supports literature which shows that surely most microfinance institutions management are unskilled, but Willebrands et al (2012) emphasized a lot to the adoption of this strategy by MFIs as it gives guidelines to mitigate challenges associated with risk taking
Summary
Micro Finance Institutions (MFIs) play a pivotal role in the provision of services to the financially excluded population, the informal sector and poor. A home population of 13.2 million, 70% live in rural areas and at least 72% live in poverty, with unemployment rate of about 80 % (ZAMFI, 2013).The informal sector is the largest employer in the country. Soon after the dollarization era in the country the demand for microfinance was large and it grew rapidly in cycle with the growth of informal operator countrywide. Empirical evidence shows that a dynamic and growing microfinance sector has contributed to the achievement of a wide range of development objectives, including: the attainment of income distribution and poverty reduction and production of goods and services that meet the basic needs of the poor, (Cook & Nixson 2000)
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