An investigation of the effectiveness of donor funded micro finance programming in Zimbabwe

Abstract

The study sought to investigate the effectiveness of donor funded micro finance programming implemented in Zimbabwe as an economic development tool to reduce poverty. An assessment of the effectiveness of microfinance programming implemented by the development sector through Zimbabwean Microfinance Institutions (MFIs) was conducted. In addition an assessment of micro finance business models and how they are integrated with donor funded project management methodologies and processes was conducted. Investigation of MFI performance indicators and effectiveness of technical support services provided by donors to MFIs was also conducted. The study was descriptive and used a mixed method approach of quantitative and qualitative data. A structured questionnaire was used to gather quantitative data and Key Informants Interviews (KIIs), two Focused Group Discussions (FGDs) and observations were used to collect in-depth qualitative data. Major findings are micro finance mainly reaches the vulnerable communities when supported by donors;donors have a social orientation and MFIs’ objective is profit making;donors mainly target as many vulnerable clients as possible using a wide range of activities;donor funded loans and financial services are cheaper than MFIs’ products without donor support;and client outreach and new financial products increase when donors support MFIs. However, limited project duration and resources constrain MFIs to achieve the ambitious set targets resulting in many MFIs not being sustainable after the micro finance project. It is recommended that donors and Non- Governmental Organisations (NGOs) design programmes/projects with long duration; focus should be on the number of loans reached rather than number of people; donors should not pressurise MFIs to hurriedly disburse loans to vulnerable clients as it increases the loan default rate; and technical support services provided to MFIs should be flexible as requested by MFIs. During the design stage of micro finance projects, donors should balance the scope of work, time duration and resources allocation. To facilitate sustainability, donors should not immediately request MFIs to remit granted revolving loan funds (RLFs) or grants soon after the end of the project. Sudden de-capitalising of MFIs is unsustainable; at least six (6) months should be the remittance period after the project end date.Donors have different micro finance approaches and should have a standardised programming approach used as a unified framework of micro finance programmes in Zimbabwe.