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LOANS from microfinance institutions (MFIs) rose 83,24 percent to $177,8 million in six months to June as a result of improving levels of funding in the sector particularly by institutional shareholders, development oriented donor funders and offshore funders. The total loans in the sector constituted about 4,7 percent of total banking sector loans of $3,81 billion, according to the Reserve Bank of Zimbabwe.
Zimbabwe has 130 registered microfinance institutions under the supervision of the central bank.
The RBZ however said the microfinance loan portfolio was skewed towards consumption at the expense of productive sector funding.
Consumption lending which is largely comprises salary based loans constituted 67 percent of total loans.
The largest and second portfolio quality as measured by the Portfolio at Risk (30 days) improved during the last quarter as reflected by the decline in the PaR for the sector from 27,14 percent as at March 31, 2014 to 14,56 percent as at June 30, 2014.
“The improvement is attributed to efforts by the industry to enhance credit analysis in an effort to curtail over indebtedness among borrowers,” said the central bank.
“A number of MFIs are increasingly making use of credit checks while others are resorting to offering salary based loans whose repayments are based on deductions at source.”
The number of MFIs has been fluctuating as some institutions have not been able to renew operating licences due to viability challenges emanating from high levels of delinquent loans.
The top 10 microfinance institutions controlled 40 percent of the market share in terms of total loans.
Analysts said with most MFI’s lending to urban based population or civil servants Salary Services Bureau employees, there is a lack of microcredit, micro insurance and micro deposit taking institutions in the rural areas, where the bulk of the population is living.
“Private sector players need to move beyond the traditional urban micro finance model,” said one analyst.
“They need to source funding from donor and Development Finance Institutions as well as private equity players.
“The current growth in small scale agriculture and related downstream industries creates a viable growth market for micro lending.”
Online Reporter