The Impact of Regulation Policy on Product and Service Delivery of Micro-Financial Institutions:

A Case of Zimbabwe

Robert Nzaro¹, Kosmas Njanike², Eunice Jaravani³

¹Bindura University of Science Education. Department of Banking and Finance

²Bindura University of Science Education, Department of Banking and Finance

³Bindura University of Science and Education, Department of Banking and Finance

Corresponding author Email : kosmasnjanike@gmail.com

Accepted 28 February 2013

Abstract

There has been very little research on the regulation and supervision of micro finances and their impact on product and service delivery. To date, much of the research has been limited to case studies of successful micro finances in Asia, Africa and Latin America. The studies have tended to focus on micro economic impacts and relationships between micro finances and their recipient credit clients. The study examines the overall impact of regulation and supervision on product and service delivery of microfinance sector. The analysis was done at two levels, that is, formal and informal MFIs. Descriptive research design was used on a sample size of 100 MFIs (60 formal and 40 informal MFIs).  Primary and secondary data collection techniques were used to obtain the data. The study found that non or lax regulation of the microfinance sector in Zimbabwe has a detrimental effect on product and service delivery development in the sector. The evidence also suggests that the costs of compliance are considerable and would outweigh any potential benefits that would be gained. The research findings imply that the stage of development of the microfinance sector needs to be taken into account in establishing the regulatory framework.  For regulations to be beneficial, they have to take industry structure into account, especially in relation to regulatory capital requirements, ownership and governance structure, size and lending methodologies.

Keyword: Regulation, Micro Finance Institutions, Central Bank