Microfinanciers’ reach drops 15pct

CREDIT-only microfinance institutions served 135 620 active clients as at December 31, 2022, a decrease compared to 161 375 in the prior comparative year, a new report has shown.
According to the latest Zimbabwe Association of Microfinance Institutions (Zamfi) report, the decrease in outreach is an indication of low and marginal efforts being done with respect to financial inclusion as far as credit is concerned.
The Reserve Bank of Zimbabwe 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 reduces 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 uptake of formal banking products has increased to 46 percent in 2022, from 30 percent in 2014, with mobile money playing a pivotal role in the increased uptake and usage of financial services and products in Zimbabwe and in making the financial sector more inclusive.
According to the Zamfi report, as at December 31, 2022, the majority of microfinance institutions in the credit-only microfinance sector were adequately capitalised with minimum capital above the US$25 000 required by the central bank.
Aggregate equity capital for the sector amounted to $8,2 billion as at December 31, 2022, a 272,7 percent increase from $2,2 billion reported in the prior year, attributed to significant growth in retained earnings.
“In a bid to supplement the equity capital, the sector tapped funds from the debt capital market. The amount of debt capital amounted to $11,5 billion as at December 31, 2022,” the report read.
The total assets for the credit-only microfinance sector amounted to $20,8 billion during the year under review, up from $4,4 billion reported in the prior year. The dominant asset has remained being loans at 80 percent, fixed assets at nine percent and other assets at 11 percent.
Zamfi said the credit-only microfinance institutions sector recorded a portfolio at risk ratio of 14,53 percent and 12,71 percent for the two respective quarters ending September 30, 2022 and December 31, 2022, a sign of deteriorating levels of portfolio quality.
The sector’s credit risk coverage ratio significantly deteriorated from 22,17 percent as at September 30, 2022 to 12,74 percent as at December 31, 2022, indicating inadequate levels of bad debt provision against credit losses in the sector.
The credit-only microfinance sector reported aggregate profits of $3,4 billion for the year, a 161,5 percent increase from $1,3 billion reported in the corresponding period in 2021 largely from interest income generated from the core business of advancing loans to individual and corporate clients.
In the period under review, the distribution of loans reflected 42 percent for business loans, 31 percent for consumption, three percent for agricultural and 23 percent for other loans.
Zamfi said the sector has remained financially sustainable as indicated by the operational self-sufficiency ratio of 135,7 percent reported during the period under review, which is above the international benchmark of 120 percent.
“The overall performance of the microfinance sector for the financial year ending December 31, 2022, was therefore, stable despite being subjected to challenges related to hyperinflation, depreciating local currency and low levels of economic growth.
“While these challenges are exogenous and beyond the control of the sector, there still is leadership obligation on the part of players in the sector to find practical and credible solutions to the challenges to remain viable and sustainable so as to model the sector as a leader in the financial inclusion agenda for the country,” Zamfi said.
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