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Nelson Gahadza, Business Reporter
The Zimbabwe Association of Microfinance Institutions (ZAMFI) says microfinance institutions should adopt resilient business models to withstand any market fluctuations and other adverse economic developments.
According to the Reserve Bank of Zimbabwe (RBZ), microfinance institutions continue to play a significant role in promoting financial inclusion and driving sustainable economic development in the country.
Central bank data shows that as of December 31, 2023, there were 238 registered microfinance institutions, comprising 230 credit-only microfinance-institutions and 8 deposit-taking microfinance institutions (DTMFIs).
ZAMFI said in a microfinance sector performance for the period January to September 30, 2024, that the sector’s capital adequacy position was strong.
“The sector should strive to maintain a disciplined approach towards cost management, especially in the current environment characterised by unstable macroeconomic conditions.
“In such an environment, management of operational overheads becomes a key strategic pillar in achieving profitability, including being able to maintain diversified sources of revenues and portfolio mix,” ZMFI said in the report.
The report said three deposit-taking MFIs submitted their financial reports, and their US dollar loan portfolio increased 72,6 percent from US$25,6 million to US$44,2 million.
The minimum capital requirement for DFMIs is US$5 million, or ZiG equivalent.
ZAMFI said the asset structure of the sector was satisfactory, after total assets increased substantially to ZiG2,8 billion as of September 30, 2024, up from ZiG743,1 million reported on June 30 2024.
The total loan book, as of 30 September 2024, amounted to ZiG1,8 billion and included US dollar-denominated loans of US$84,9 million. The US dollar loan portfolio recorded in the previous quarter was US$53,7 million.
According to the report, debt capital amounted to ZiG1,5 billion, an increase of 99,66 percent, reflecting a sector largely borrowing its funds from the banking sector.
“The microfinance sector could diversify its source of funds to include capital markets through capital-raising initiatives such as the issuance of bonds, commercial papers, and debentures, which could be structured at much lower costs compared to commercial loans from the banking sector,” ZMFI said.
During the period under review, the credit-only microfinance recorded a portfolio-at-risk ratio of 8,3 percent, down from 9.05 percent reported in the previous quarter.
However, the quality of the US dollar loan book remains a cause of concern with a portfolio at risk ratio of 10 percent, well below the international benchmark of 5 percent.
ZAMFI said the sector should strive to maintain a disciplined approach towards cost management, especially in the current environment.
Mukuru Financial Services Zimbabwe became the latest microfinance institution to be granted a deposit-taking microfinance institution (DTMFI) license in Zimbabwe.
The company, in a statement, said the licence will enable it to expand on its mission of driving financial inclusion in the country, especially among under-served groups.
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