Published: 03 August 2017

The Deposit Protection Corporation (DPC) has warned the public against depositing cash with unregistered microfinance institutions, saying they risked losing their money to dubious entities.

Over 100 deposit-taking microfinance institutions have emerged in recent years, with only four registered with the Reserve Bank of Zimbabwe (RBZ) and DPC.

GetBucks Microfinance Bank, Success Microfinance, Lion Microfinance and African Century Limited are the only deposit taking microfinance institutions registered with the central bank and with membership of the DPC.

DPC is mandated by law to provide protection to depositors in institutions licensed to operate banking or finance businesses in the country such as commercial banks, merchant banks, building societies, finance houses, discount houses and deposit-taking microfinance institutions.

Registered institutions pay 0,2 percent of total deposits to the Deposit Protection Fund (DPF), payable on a quarterly basis.

However, it has been observed that most depositors are falling prey to unregistered microfinance institutions which offer higher interest rates than those given by registered banks.

Recently, thousands of people, mainly civil servants, lost over $1 million after a microfinance company in Mutare , which had been offering interest rates of up to 30 percent, collapsed.

Similar cases have been reported in Harare, Masvingo, Gweru and Bulawayo.

DPC chief executive officer, John Chikura, said depositors should be wary of unregistered microfinance companies.

He said registered institutions had DPC stickers on their doors.

He said unregistered financial institutions were not allowed to take deposits.

"If they take deposits, they should be members of DPC. So it's actually illegal on their part. People need to be careful," Chikura said.

"Most people are attracted by higher returns because when they go to (a registered bank) they are given two percent interest and they don't like that. They want the 15 percent interests given by these microfinance institutions. But they only get that the first and second months before their money is stolen," he said.

Chikura said DPC was unable to intervene and recover funds on behalf of depositors duped by unregistered institutions.

"We are unable to intervene on behalf of the depositors because the institutions are not registered with the central bank as deposit-taking institutions. They are not supervised by the Reserve Bank (of Zimbabwe) and they are not our members.

"What we can only do is advise those cheated to report to the police," he said.

Since its inception in 2003, DPC has compensated depositors of nine failed banking institutions.

These include Century Discount House, Rapid Discount House, Sagit Finance House, Genesis Investment Bank, Royal Bank, Interfin Bank, Allied Bank, AfrAsia Bank, and Trust Bank Corporation.

Payments to depositors of the last six banks is still in progress and 11 620 depositors have been paid to date out of a total of 54 909 depositors.

DPC has also paid $3,2 million out of the $6,4 million from its DPF to the affected depositors as at July 10 2017 at a cover level of $500 per depositor.

An additional $7,4 million has also been paid under the liquidation front to creditors as at May 30 2017.
- fingaz

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