Microfinance sector’s loan book grows

ZIMBABWE’S credit only microfinances advanced loans amounting to $18,5 million in the first quarter, growing the sector’s loan book from $207, 3 million as at December 31, 2018 to $225,8 million as at March 31, 2019 .

BY BUSINESS REPORTER

According to the Zimbabwe Association of Microfinance Institutions’ first quarter report, the sector registered an aggregate net profit of $4,5 million for the three months period, compared to $2,7 million recorded during the same period last year.

Total income from interest and fees amounted to $30,2 million against a total cost of $25,6 million leading to an operational self-sufficiency ratio of 117% as at March 31, 2019.

Return on equity and assets improved significantly to 24% and 8% respectively, compared with 16% and 5% as at December 31, 2018. The top five MFIs accounted for 76,1% of the total loans, while the largest MFI, with a total loan book of $74,6 million, had a market share of 33,2%. Credit risk as expressed by the ratio of portfolio at risk (PAR >30DAYS) in the microfinance sector has significantly deteriorated from 7% in December 2018 to 11% as at March 31, 2019. This is way above the 5% benchmark, and as such poses a threat to the commercial viability of many MFIs in the sector.

“Since most loans in the sector are unsecured, their delinquency levels, unless attended to swiftly and decisively, may have a contagious effect of affecting both the profitability and capital levels of some MFIs,” the report read.

“The short to medium term solutions lie then in controlling the level of credit risk through the adoption of preventive credit risk mitigation measures such as the re-designing of loan products that meet client needs, tightening client screening systems as well enhancing the role and technical capacity of loan officers and committees engaged in approving credits before disbursements”.

In Zimbabwe, where the majority of citizens have no access to formal banking facilities, the MFI sector plays a significant role in the financial inclusion agenda and the attainment of Sustainable Development Goals.