November 24, 2024
Microlenders make strides in financial inclusion
THE Reserve Bank of Zimbabwe (RBZ) says local microfinance institutions have made significant progress towards financial inclusion, buoyed by digital financial services.
In a microfinance quarterly industry report, the central bank said digital financial services continue to drive the expansion of financial inclusion to marginalised communities, including remote areas of the country.
Total value of loans to women of $42,97 billion represents a 144,26 percent increase over the quarter from $13,93 billion reported as at March 31, 2022.
Data from the report shows that Internet banking subscribers increased by 4,83 percent to 624 706 as at June 30, 2022 from 595 939 as at March 31, 2022, while mobile banking agents marginally increased to 52 983 from 52 719 over the same period.
As at June 30, total loans to micro, small and medium enterprises and the youth significantly increased to $34,02 billion and $12,72 billion from $13,93 billion and $8,13 billion, respectively, representing a 144,6 percent and 56,36 percent improvement. Total value of loans to women of $42,97 billion represents a 144,26 percent increase over the quarter from $13,93 billion reported as at March 31, 2022.
The proportion of loans to micro, small and medium enterprises to total banking sector loans increased from 4,63 percent as at prior quarter to 5,54 percent, while loans to women as a proportion of total banking sector loans also rose from 5,42 percent to seven percent over the same period.
Average loans to youth accounted for only 2,07 percent of the total banking sector loans.
“The drafting of the National Financial Inclusion Strategy II 2022-2026 (NFIS II) has reached the final stages, after incorporating results from FinScope MSME and Consumer Surveys and key learning points from peer learning visits to Tanzania and Zambia,” the report said.
The central bank has for the past decade pushed for the country’s unbanked population to participate in the formal economy by encouraging innovation in the financial technology sector.
Financial inclusion helps formalise the informal sector and reduce the extent of shadow banking. It thus provides an improved framework for monitoring and supervision of financial transactions and, in turn, shields the customer from malpractice and the financial system from unwarranted shocks.
The RBZ said the number of active bank accounts registered a 10,44 percent decline over the quarter to 6,95 million as at June 30 this year, attributable to withdrawal and/or closure of branches in some service centres across the country by some banking institutions as part of the branch rationalisation process to contain costs.
During the quarter under review, there were 199 registered microfinance institutions, comprising 191 credit-only microfinance institutions and eight deposit-taking microfinance institutions. A total of 29 credit-only microfinance institutions were licensed between December 2021 and June 2022. The microfinance sector recorded an 8,22 percent growth in branch network, to 974 from 900 as at the prior quarter.
“The total number of active loan clients in the sector decreased by 2,76 percent from 288 135 as at March 31, 2022 to 280 172 during the period under review. The decline in active loan clients is attributable to the negative effects of Covid-19 pandemic, which caused many small to medium enterprises businesses including vendors who are the main clients for the sector, most of whom are still struggling to revive operations,” the RBZ said.
The sectors’ aggregate total equity registered a 118,25 percent increase over the quarter to $14,470 billion as at June 3, 2022 attributed to injection of additional capital by shareholders of some microfinance institutions and capitalisation of retained earnings in a bid to comply with the minimum capital requirements.
The microfinance industry registered a 378,64 percent increase in aggregate sector net profit of $4,93 billion for the period ended June 30, 2022, largely driven by adoption of digital and electronic banking services which facilitated a reduction in operating costs and growth in loan portfolio.
In this period, the industry’s aggregate loan portfolio was $15,86 billion reflecting a 77,21 percent increase from $8,95 billion achieved in the previous quarter.
“The average loan size per borrower increased by 51,94 percent from $37 252,34 to $56 603,51 reflecting the impact of inflationary pressures on the value of loans needed by borrowers,” the RBZ added.
The central bank noted that the microfinance sector’s lending portfolio was skewed towards the productive sector, with loans to the productive sector accounting for 65,83 percent of the total loan portfolio of $15,86 billion as at the period under review.
Consumptive loans amounted to $5,42 billion out of the total loan portfolio, representing a marginal decrease in the proportion of consumptive loans to total loan book, from 39,99 percent to 34,17 percent, respectively.
Total deposits decreased by 34,79 percent to $1,37 billion during the quarter under review largely driven by an 80,39 percent decrease in deposits at one of the microfinance banks, emanating from high foreign currency deposit withdrawals.
The subsector’s average prudential liquidity ratio increased from 215,83 percent in the prior quarter to 236,47 percent, against a prudential minimum threshold of 30 percent.
“The high prudential liquidity ratio is reflective of the sub-sector’s conservative approach to lending and the resultant excess liquidity in the subsector, which could have been deployed in the core business of loans to generate more income,” the report said.
