Chronicle Editor
Oliver Kazunga, Senior Business Reporter
THE Zimbabwe Association of Microfinance Institutions (Zamfi) says the credit-only microfinance sector’s total loan book improved marginally to $352,2 million as at the end of September 2019 from $316,3 million in June.
In an analysis report of the microfinance sector for the quarter ended September 30, 2019, Zamfi indicated that it was worried about the marginal increase in total loan book if compared to a growth rate of $66,2 million during the March-June quarter.
“The credit-only microfinance sector total loan book marginally increased from $316,3 million as at June 30, 2019 to $352,2 million as at September 30, 2019. This translated to an increase of $35,9 million compared to $66,2 million during the March-June quarter period.
“This is a worrying trend, especially when the exchange rate depreciated from US$: ZWL$6,54 as at June 30, 2019 to US$: ZWL$15,19 as at September 30, 2019,” it said.
Zamfi said the overall net effect of inflation was a significant reduction of microfinance balance sheets in US dollar terms when compared with the 2015 period when the bond note surrogate currency was first introduced.
According to the Zimbabwe National Statistics Agency, the country’s monthly inflation for the month of October was reported as 38, 75 percent.
“Going forward it should, however, be expected that lending by both banks and microfinance institutions is set to significantly increase after the Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee resolved to cut the overnight rate from 70 percent to 35 percent with effect from November 2019.
“This is meant to stimulate lending to productive sectors. In theory, the rate indicates the level and direction where the central bank expects interest rates in the market to follow and as such financial institutions are generally expected to adjust their rates downwards,” said Zamfi.
The association’s Bulawayo office regional co-ordinator Mr George Nhepera told Business Chronicle that while there has been marginal improvement in the loan book during the period under review, Zamfi was confident that the total loan book trajectory would improve for the better.
‘‘We are, however, optimistic that this is likely to change for the better.
“This is in the light of Government shift in policy from austerity to stimulus economic policies going forward. Already the overnight lending rate has been adjusted downwards, a clear policy shift and signal to promote lending business,” he said.
In the report, Zamfi also noted that the microfinance sector is a significant player in supporting the productive and agricultural sectors.
During the period under review, the two sub-sectors each constituted 33 percent of the credit-only MFIs total loan book .Consumptive loans constituted 23 percent of the MFIs credit-only loan book while other loans constituted 11 percent.
“The agriculture sector remains a clear favourite for finance by MFIs especially lending for the production of cereal crops, fruits, vegetables and milk which are in high demand.
“The sector has capacity to spur and boost production both for local and export markets, which in turn will generate the much-needed foreign currency. — @okazunga.
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