Microfinance loans up 9pc

HARARE - Loans and advances in the microfinance sector increased nine percent from $272,95 million in March 2018, to close June at $297,52, the Reserve Bank of Zimbabwe (RBZ) said.

In its report for the quarter to June 2018, the central bank said total assets for the sector grew by 14,38 percent from $360,46 million in March to $412,30 million as portfolio quality deteriorated.

“Portfolio quality for the sector, however, deteriorated over the quarter as reflected by the average industry portfolio at risk (PaR) ratio which deteriorated from 9,55 percent as at March 31, 2018, to 10,5 as at June 30, 2018,” the apex bank said.

Deposit-taking microfinance institutions (DTMFIs) registered a 29,59 percent increase in deposits from $11,84 million as at March 31, 2018, to $15,34 million as at June 30, 2018.

“The sector’s net profitability remained relatively stable over the period ended 30 June 2018, compared to the corresponding period ended 30 June 2017, as reflected by a marginal decrease in after tax profit from $13,98 million for the half-year ending 30 June 2017, to $13,67 million for the half year ending 30 June 2018.

“The decline is largely attributed to unsustainably high cost structures at some of the microfinanciers and the increased provisions for the nonperforming loans at a number of microfinanciers,” said RBZ

During the period under review, the microfinance sector remained operationally viable with an average Operational Self-Sufficiency (OSS) ratio of 154,76 percent as at June 30, 2018 up from 150,49 percent as at June 30, 2017.

The sector also recorded a growth in total deposits, largely due to aggressive deposit mobilisation by some deposit-taking microfinance institutions.

“Time deposits constituted 75,20 percent of total DTMFIs deposits of $15,34 million as at June 30, 2018. The subsector recorded a 17,62 percent increase in the number of savings accounts from 8,668 as at March 31, 2018, to 10,202 as at June 30, 2018,” the report said.

However, the limited funding base continues to militate against the microfinance sector’s ability to underwrite more meaningful business as evidenced by the size of the sector’s loan book, which has remained suboptimal over the years.

“Aggregate equity decreased by 3,75 percent from $143,53 million as at March 31, 2018, to $138,15 million as at June 30, 2018.

“The decline in the industry equity was largely attributed to losses recorded by some microfinanciers, and failure by other microfinanciers to attract meaningful investment into the sector,” said RBZ.

As at June 30, 2018, a total of 183 institutions out of 190 credit-only microfinance institutions, were compliant with the minimum capital requirement of $20 000, while five out of six DTMFIs were compliant with the regulatory capital requirement of $5 million.

Seven credit-only microfinance institutions had capital levels below the prescribed minimum capital of $20 000 largely due to losses recorded during the review period.


 

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