Microfinance regulations await gazetting

THE Reserve Bank of Zimbabwe says the proposed microfinance regulations necessary for the Microfinance Act now await gazetting.

The draft microfinance regulations are aimed at operationalising certain sections of the Act, including minimum capital, shareholding limits and asset quality requirements.

According to official data, there were 216 registered microfinance institutions comprising 208 credit-only and eight deposit-taking microfinance institutions in the country as at June 30, 2023.

“Additional proposals are being made to shareholding and governance regulatory framework to provide different thresholds for credit-only institutions, which are usually financed through the entity’s shareholders as opposed to institutions that are funded through deposit-taking,” the central bank’s governor, John Mangudya, said in his mid-term monetary policy statement last week.

Reserve Bank of Zimbabwe governor, John Mangudya

He said microfinance is increasingly considered a key instrument in the implementation of effective and sustainable strategies aimed at poverty alleviation and inclusive economic development. During the half year to June 30, 2023, the microfinance sector registered significant progress with an aggregate net profit of $145,52 billion from $4,93 billion recorded during the comparable period in 2022.

Mangudya said the increase, which exceeded the annual inflation of 175,8 percent during the six months under review, was largely attributed to improved operational efficiency as reflected by an improvement in the average operational self-sufficiency ratio to 230,39 percent for the half year against the international benchmark of 100 percent.

The microfinance sector registered a 596,83 percent increase in aggregated equity to $250,23 billion as at June 30, 2023 from $35,91 billion during the prior period attributed to organic growth and fresh capital injection by some institutions.

During the period under review, three out of seven operating deposit-taking microfinance institutions were compliant with the minimum capital requirement of $5 million.

The central bank said the non-compliant institutions are at various stages of capital raising initiatives and they continue to submit on a quarterly basis, updates on their re-capitalisation initiatives.

As at June 30, 2023, the aggregate core capital for the deposit-taking microfinance institutions sub-sector was $131,32 billion, a significant increase from $29,49 billion recorded during the comparable period.

A total of 170 out of 208 credit-only microfinance institutions were compliant with the minimum capital requirements of ZW$ equivalent of US$25 000. Total loans for the microfinance sector increased by 672,66 percent to $355,50 billion during the half-year period from $46,01 billion recorded in the comparable period.

The sector registered an improvement in the loan portfolio quality as evidenced by a decrease in the portfolio-at-risk ratio from 10,95 percent to 9,48 percent over the same period.